> Approval Process
You'll be asked about your net worth, the difference between
the value of everything you own and the amount you owe. Lenders
take into account your bank balance, any types of investments,
other real estate, cars and boats, other loans, credit card balances
and many other things. Remember to be as specific as possible.
So if you have a coin, significant stamp or art collection, have
it appraised!
Your credit rating is your history of loan repayment and will
be used by lenders as an indicator of your ability to repay your
mortgage. It covers how you've managed past debts or if you've
filed for bankruptcy. You'll be asked to sign a form allowing
your financial institution to gather information from your employer,
creditors and credit rating agencies.
If you've had credit problems, it may be a good idea to check
and clean them up before you apply for a mortgage. You can check
your own credit rating by contacting a company that compiles the
information. One source is the Trans Union Customer Relations
Department, P.O. Box 338-LCD1, Hamilton, Ontario L8L 7W2. Simply
send a note asking for your credit rating along with photocopies
of two pieces of ID with your current address, plus a photocopy
of a utility bill or credit card invoice. The process takes about
two weeks and you'll get a good idea of how you'll be evaluated
by the banks.)
If there is an outstanding debt, contact the creditor and resolve
it. If you notice an error, report it immediately in writing and
get it resolved.
Although your credit may not be perfect, it does not mean you
are unable to purchase a home. Make sure you talk to a mortgage
broker about your situation before you give up on your dream.
Even if you can't buy now, your mortage broker can help you re-establish
your credit so that one day you will be able to live your dream
of owning a home.
> Getting Ready (to see a lender)
Remember that impressions count. The best way to make a good
impression is be prepared. Gather the following information to
submit to your lender:
- Current statement of earnings of all purchasers
- Updated bank account balance(s)
- Current credit card statements
- Car loan or lease information
- Other debt information
- All asset information:
- vehicle information
- home furnishings
- investments
- vacation property (trailer, timeshare)
- collectibles (they must be professionally appraised)
- Projected down payment information
Names, addresses and telephone numbers of:
- Employer(s)
- Chequing/savings account bank branch and contact
- Broker
- Landlord
You may also wish to do a rough calculation to figure out your
debt service ratio. This will give you a rough idea of where you
stand before you see your lender.
> Applying
When applying for a mortgage, provide prospective lenders with
enough information about your work history, debts and assets.
They're looking at the state of your personal finances. They will
look at your gross income and potential mortgage payments and
property tax expenses to come up with a Gross Debt Service ratio
(GDS). This is usually limited to 30-35% of your gross income.
To that lenders will add all other debts to come up with a Total
Debt Service ratio (TDS), which can't exceed more than 40 percent
of your gross earnings.
> What Lenders Look For
Lenders are looking at the risk factors from two points. First,
will you be able to make your scheduled monthly payments? Second,
if you default (don't make your payments) can the financial institution
get enough money from the sale of the house to repay the loan?
