What Do Mortgage Lenders Look For In An Applicant?
Thinking about purchasing a home? Then you need to know what a mortgage lender is looking for in an applicant.
When a lender is reviewing your application, the most important question that they are asking themselves is "what is the likely hood of this applicant paying us back?”
A mortgage lender will look at 3 very important points:
1) Income: A steady income helps solidify the point that you have the ability to earn and that you can consistently generate money to pay off the mortgage. The higher your income is, the higher the mortgage amount you can get approved for.
2) Credit Score: Having a good credit score is a very important point for lenders. An applicant with a bad credit score becomes a ‘high risk’ for some mortgage lenders. Check your credit score today and keep track of it constantly. You can check your credit score online on websites such as http://www.equifax.ca/. See a financial advisor today to learn how you can improve your credit.
Credit Score: 725 or higher is considered to be very good
3) Down payment: How much money do you have saved up? If not very much, then get started right away! There are 2 types of mortgages: conventional and high ratio. If you are not able to put down 20% of the purchase price in down payment, then you fall under ‘high ratio’ mortgage. Though there are options such as 5% or 10% down payment, this requires you to be insured by CMHC (Canadian Mortgage and Housing Corporation) and generally, you will receive a higher interested rate.
In summary, if you are thinking about purchasing a home, you need to work on 3 main areas: Have a steady income coming in, maintain a good credit score and make sure you have the down payment. Though having all 3 areas covered puts you on the right track, every situation is different. Contact your REALTOR® for individual guidance.
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