Seemingly, what can be so hard about approving a mortgage? But for some people, it can be a really stressful and long process. To ease your life a bit, we will talk today about the easiest bank to get a mortgage in canada and give you 7 useful tips.
Getting a mortgage is not only about “I decided to do so, so I applied for a mortgage”. Banks can decline your mortgage for several reasons. So before applying for it, you must be absolutely sure that your mortgage will be approved. To be so sure you need to check your finances long before applying. And now let’s talk about the tips which will help you with this.
1. Pay a big down payment
Down payment is the amount of money you put down for your new home. You can put down anything from 5% to 30% of the purchase price. Depending on this it will be easier or more difficult to get a mortgage.
The logic here is simple – the bigger amount of money you paid in the beginning, the smaller your regular mortgage payment will be because there will be less interest in it (and shorter). Moreover, the down payment of less than 20% requires special mortgage insurance, which will be also added to your mortgage. But what about the easiest bank to get a mortgage canada? We will mention it later.
In Canada there are also special requirements based on the overall prices:
- Less than 500.000$: The minimum down payment is 5% of the purchase price
- 500.000 — 999.999: You’ll need 5% of the first $500,000, and 10% for the portion of the purchase price above $500,000
- $1 million or more: 20% of the total purchase price
Of course, we understand that it is easier said than done, especially when prices on real estate are getting higher and higher and some houses in Vancouver already cost a million dollars. Nevertheless, try to save as much as you can and do not hesitate to use different online calculators to see how much money you can spend on it.
2. Survey your credit score
A good credit score is crucial for getting a mortgage in Canada. Your credit can be somewhere between 300 to 900 from poor to excellent. To be approved for a mortgage even by the easiest bank to get a mortgage canada you need to have at least 665 points. But here, like with a down payment, the bigger it is – the better it is for you.
But how can you get a good credit score? First of all, it is really important to pay your credit card in time and never exceed your credit limit. If you overdraft your credits, try to do it in small amounts and as rarely as possible. Do not apply for too many loans at once (you can get up to 4 per year).
Credit mix with mortgages, credit cards, and student loans is also something you need to check too. Try not to apply for new loans right after one another or just before your mortgage renewal. Sometimes it can cause a slight decrease in your credit score and lenders will look worse on you than if you did the same thing six months ago.
You can also check your credit score, using different online services. Normally, online services use the data from 2 Canada`s bureaus:
- Equifax
- TransUnion
The information may differ but you still will get an overall picture of what is going on and will be able to improve your credit score before applying for a mortgage.
3. Pay existing debts
If you have any debts, try to pay them in time. You can get a lower interest rate on your new mortgage if you show that your debt-to-income ratio is lower than 25%. Paying existing debt may improve your score too.
Your debts do not need to be necessarily 0$, however, you should understand that a mortgage is a huge responsibility and there is literally no room for delays. That is why it is very important to calculate your income and payments in advance. Banks do not require that, it is just a useful tip for you to add your to-do list.
4. Do not even think about changing job
If you are employed at the moment, you will need to get proof of employment from your employer. However, if you are planning to change your job – do not even think about it. Changing jobs can increase your chances of being declined for a mortgage. The length of time at the current job is needed too.
The logic of banks here is simple: if you are employed (especially on a full-time job) then you have a stable income and will be able to pay your mortgage in time. The longer you are employed the more reliable you are and for that, you can even get lower interest for your mortgage.
If you are self-employed it is not bad either. But you can be asked a lot of questions to determine whether you will be able to pay your mortgage. You can be asked to show your business income for several years, for example. If you work, but you do not have any documents which can confirm that — it is really bad. In this case, it will be good for you to find an official job for the time when you are applying for a mortgage. Later, you can quit and go back to your other source of income, or stay, maybe you will like it!
5. Get a great rate
What is a great rate? Do not take the first offer from a bank or even from the easiest bank to get a mortgage canada. Shop around and see what other banks have to offer. Do not just compare the interest rates but also look for a free credit card, free checking account, and other bonuses, which will make life easier after you buy your mortgage.
For it will be easier for you to look for good offers you should hire a mortgage broker, who won`t charge you for consultation. Plus, it is better to start checking overall mortgage rates across the whole country. Moreover, this consultation can also help you to get pre-approved for application. Wonder what is it? See in the next paragraph.
6. Mortgage pre-approval is important
You are ready to get a mortgage, but are you sure that you can afford it? Before you apply for a mortgage make sure that you have calculated it. That is if you are planning to buy a house in Vancouver, take out real estate loans in Canada. This way the rental income will be included in your calculation and you will know exactly how much money can be saved with the down payment. Also, calculate your monthly mortgage payment. If it doesn’t sound that terrifying for you then just go ahead and apply right away. But if you feel like getting scared, at least try to get pre-approval by the easiest bank to get a mortgage canada.
Pre-approval gives you a special document, with a pre-approved amount of mortgage, monthly payments, etc. It is valid from 90 to 120 days, allowing you to look for houses you can truly afford and make good proposals.
7. Be honest to yourself
Of course, your financial state will be regarded a lot of times under a microscope, but, unfortunately, no one can read each other’s thoughts. So, only you can really predict your expenses. So, it is necessary to be honest with yourself, if you hate your job and want to quit it – do it! But wait with the mortgage, because after the loss of your job you will definitely experience a lack of money.
Conclusion
The general rule is, to get the best mortgage you should do your research and get good pre-approval. This will only increase your chances of getting a great mortgage.
We hope that this article will help you out with different things, which you need to know about mortgages in Canada. For more information on mortgages, visit free financial calculators. There are many tools available for calculating different variables related to the house buying experience online. With these calculators, you can make calculations relating to the down payment, credit score, debt load, etc… Also, the ones for pre-qualification help predict if you are able to get approved by major banks for a mortgage application or not.