How do THEY decide if you get a mortgage?
There are several factors that Canadian mortgage lenders consider when assessing a homebuyer’s eligibility for a mortgage loan. Some of them include:
Credit Score – The higher the credit score, the better. Buyers with high credit scores typically receive lower interest rate mortgage loans and more loan options. As credit scores decline, so do the number of options and often, the required down payment a buyer must make in order to be eligible for a loan.
Proof of Income – Not only must you be able to show steady income but you must also show that you have enough income to cover the mortgage loan amount you’re requesting. The typical industry standard is that homebuyers must earn 2.5 times as much as (or more than) the loan amount they’re requesting.
Debt-to-Income Ratio – In today’s economy, earning a lot of money is not enough to convince mortgage lenders to provide a mortgage loan. You must also be able to show that you do not overextend yourself with credit that you’re given. That’s why you’ll sometimes hear about high-paid professionals being turned down for mortgage loans; their debt-to-income is too high. (“Too high” is typically debt that’s more than 30% of your income.)
These are common factors that many mortgage lenders consider. However, lending requirements are subject to each lender’s specifications. Therefore, you should always ask lenders what the criteria are to be eligible for the loans they offer.
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