Obtaining a mortgage approval is an important step for many people on their road to fulfilling their dream of buying their own house. And while websites like have made the process itself easier than ever before, there are still a couple of things you should consider to make the experience as smooth as possible.
Here are the 5 steps that will help you obtain a mortgage approval in Canada:
Prepare Yourself and have the Necessary Information at Hand
When applying for a mortgage, there are certain documents you are going to have to provide. These can include employment information like e.g. payslips, financial information like e.g. an inventory of your current assets and liabilities, or details about the home itself like e.g. the address and property tax estimates.
Also, make sure to check your credit score. In Canada, credit scores can range from 300 to 900 and fall into five categories: Poor, Fair, Good, Very Good, and Excellent. This credit score is essentially a tool to gauge your financial trustworthiness at one glance and it is recommended that you have a credit score of at least 660 or higher when applying for a mortgage.
Save a Larger Down Payment
Whenever you buy a home, mortgage or not, a certain amount will have to be paid upfront. And the bigger your down payment, the better because the less you have to borrow and the more trustworthy you already appear.
In Canada, there are minimum down payment requirements that are based on the home price. They are as follows:
- Less than $500,000 –> 5% of the purchase price.
- $500,000 to $999,999 –> 5% of the first $500,000, + 10% for the portion of the purchase price above $500,000.
- $1 million+ –> 20% of the purchase price.
Secure Your Pre-Approval
With all the documents and your down payment ready, you can now apply for a mortgage pre-approval. The financial institution will check your documents and also consider things like employment status and debt-to-income ratio and eventually hand out a pre-approval, which is usually valid for 90 – 120 days, which should give you enough time to find a home.
Shop Your Options
Once you have all the documents ready it is only a little extra work to submit them to different lenders and scout for the best rate. Often the differences in offers will be quite significant. Broke websites like altrua can also help with this process and guarantee you the best rates available!
Know Your Bottom Line
Only you can truly know what you can or can’t afford. Account for possible changes in living situations in the future or maybe extra costs necessary for childcare. If your application is good, you might get approved for a mortgage much higher than you initially requested.
Don’t fall into the trap of wanting to spend every penny of that because you will have to pay it back at some point. Stick to what you need and what you can truly afford!
