Your Data & How it's Analyzed
The year 2020 has been off to an interesting start- the world as we know it has completely changed with the Covid-19 virus and the lockdown procedures placed in effect.
Many businesses and schools have had to close, leaving many families wondering how it’s going to affect them personally, with the biggest concern often being “how will I be able to pay my bills?” , or, “Am I able to defer my mortgage payments?” In times like these it’s important to act quickly and efficiently.
Each property type requires different maintenance; also tax requirements. Distinguishing between the various property types such as a detached house, townhomes or condominiums, is essential. Detached homes tend to be the most expensive type of property to purchase due to the associated land costs. With condos, you’re responsible for paying towards its overall maintenance fees. In each case, these property types have different maintenance and tax requirements, which can impact your pre-qualification dramatically as your responsibilities are distinctive.
Additionally, how your property will be occupied alters your pre-qualification amount. If you intend on renting out your property, note that rental units have different qualification criteria and rates but often help to increase your purchase power.
Money Trail & Management
Your down payment is a percentage of the selling price and can come from investments, a financial gift from a parent/blood relative. Also the sale of the current property, the sale of an asset, inheritance or funds you have saved up to purchase your property. A higher down payment can indicate that you have enough cash on hand and solid finances. If your down payment is between 5% and 19.99% of the value of the property, you will need mortgage default insurance.
When calculating the maximum home price, pre-qualification takes into consideration your current debt payments. More precisely, your outstanding debt balance (credit cards, line of credit, car loans). Income such as alimony or child support are used to calculate the minimum required monthly payments.
Your primary source of income can include child support, family allowances, investment income, rental income, or other income. If you are applying with another person, such as co-borrower, spouse or common-law partner. It is important to add their gross annual income to yours. This data helps the lender to determine if you can comfortably afford a home.
Stability & Security
A history of a steady job in any occupation helps. Lenders are more likely to lend money to people who have worked for several years at the same job, or the same type of work.
Your credit report shows how well you’ve paid your loans and other debts in the past. Your credit score affects the level of risk a lender would take when offering you financing for your home as it shows your willingness to pay. Most lenders require a FICO score of 620 or above to approve; however, they typically reserve the lowest interest rates for customers with a credit score of 760 or above.
Your pre-qualification amount is intended to accelerate the initial phase of your home buying. However, because the information is self-reported, you may qualify for more than your pre-qualification amount. It’s essential to be comfortable with the amount of your pre-qualification. Because there are so many factors that can affect the amount you can afford, we recommend speaking with a mortgage professional and discuss financial strategy and learn about the various available mortgage options.
Get pre-qualified on your phone! The Canadian Mortgage App’s user-friendly and highly intuitive pre-qualification wizard will help you complete your application in a matter of seconds.