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14
Sep

Mortgage Approval Tips for the First-time Home Buyers

Mortgage application is an exciting step towards a new life you may have always wanted. But, what’s the guarantee that your application will be approved? When it comes to the Canadian housing market, the past few years have seen both the lenders and borrowers facing several challenges. Mortgage approval for everyone including the first time home-buyers has become more difficult even if you enjoy a profitable and stable financial life. In this short article, we’ll share with you 5 important tips that will significantly increase your chances of mortgage approval. Let’s start.

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Don’t try getting qualified for a loan that you cannot afford

Think of the number of foreclosures you witness in your vicinity every month. Nowadays lenders are overcautious and refrain from approving a loan if they get even the slightest hint that you may find it difficult to make your payments in time. Lenders go through your TDS (Total Debt Service) and GDS (Gross Debt Service) ratios while reviewing your application. It is important that your monthly housing costs are equal to or lesser than 32% of the gross monthly income you receive. That’s your GDS ratio. The TDS ratio is your total debt load per month measured against the gross household income. Your total debt load per month inclusive of your credit card payments, housing expenses, car payments etc. must be lesser than or equal to 40% of your gross monthly income.

 

Do your homework well. Understand the submission and approval guidelines of the lender

Although it is common sense, you’d be amazed to know the number of home loan applications received by lenders that don’t conform even to the basic guidelines. Despite being technically eligible for a loan, you can’t expect your application to be approved if it doesn’t conform to the basic submission guidelines of the lender. It is all right to have a good understanding of your own needs, but you must also pay heed to the limits put by the lender with regard to the mortgage amount, square footage etc. If you’re going to involve an agent, ensure that he/she enjoys good reputation and has a keen eye for the details.

Your notes must be thorough and concise

Regardless of whether your application is submitted directly or via an agent, it is important that you provide every piece of information in an easy to read and concise format. Avoid irrelevant details related to your family history and provide only helpful and relevant financial information. Keep everything as concrete and quantifiable as possible, and back it up with document based evidence. Although character information counts, it is only the duration of your current job or the number of years you’ve stayed at one place that matter.

Avoid making any major life changes inside 6 months of your application

You must avoid making any major purchases (for ex. a new vehicle) or avoid changing jobs within 6 to 9 months of submitting your mortgage application. Why so? It will make the lender question your commitment and financial stability. A vertical move in your place of work may still be acceptable as lenders consider that a natural progression.

Be aware of your credit rating

In the event that you’re uncertain about your credit rating or credit history, either check it yourself or involve your bank/broker on your behalf. If your credit rating is bad, it’ll be better if you avoid applying for a loan right now and wait until you build it up to a respectable level. Doing so will not only improve your mortgage approval chances, but will also help you in getting a low interest rate.

Although mortgage approval may seem like a daunting task right now, the actions that can improve your chances are nothing but the ones based on common sense. The same restrictions that appear stifling to you right now will help in ensuring that you don’t lose your home in the longer run.

by Benson Mortgage
in Mortgage