Getting a Mortgage For Your Residential Property
Whether you are first-time buyer or an experienced buyer with excellent credit, Atlas Mortgage Group has access to the very best products and rates available across Canada. Below is a brief overview of the mortgage approval process.
Mortgage Pre-Qualification: This process provides you with an estimate of how much you can afford based on your own report of your financial situation. The benefit of this is that it sets the baseline for a realistic price range and allows you to start looking for that perfect home within your means! Now this process is not a mortgage approval, or even a pre-approval but it helps to establish your budget.
Mortgage Pre-Approval: While this may seem similar to pre-qualification, the pre-approval process requires submission and verification of your financial history to ensure the most accurate budget to fit your needs. A pre-approval will help you determine how much you can afford, the rate of your mortgage term, and the monthly mortgage payment.
Financial Approval: Financial approval is the last step to getting your mortgage and buying your home! The lender will conduct a final check on your financial profile to make sure nothing has changed since the pre-approval. To avoid jeopardizing your pre-approval, it is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!
A down payment is the amount of money you need to put down on your new property. The ideal down payment for purchasing a home is 20%, however you can purchase a property with as low as 5%. It is important to note that any potential buyer with less than a 20% down payment MUST purchase default insurance on the mortgage. If your down payment is coming from funds of your own, then a history on all funds must be submitted with your mortgage application. If your down payment, or a portion of your down payment is a gift from a family member, a signed gift letter is required.
One of the key factors lenders consider when assessing whether or not you are a good candidate for a mortgage loan, is your credit score. Your credit score is a measure of your financial health, and shows lenders their level of risk if they lend you money. Whether you qualify for a mortgage through a bank, credit union or other financial institution, you should be aiming for a credit score of 680 for at least one borrower, especially if you are putting under 20% down. If you are struggling with credit score issues, there is also the option of going with a B lender. If you're unsure of your credit score, reach out to Atlas Mortgage Group to discuss your options.
The affordability of your mortgage is dependent on two ratios: Gross Debt Service (GDS): Your GDS is the amount the home will cost you on a monthly basis. It includes your mortgage payment, heat, property taxes, and condo fees if applicable. The total GDS should not exceed 39% of your gross monthly income. Total Debt Service (TDS): Your TDS is the combination of both GDS and any other debts you have including: loans, lines of credit, credit cards etc. The total TDS should not exceed 44% of your gross monthly income.