Unless you have discovered a hidden treasure somewhere, hit the lucky numbers on the lotto or got a surprise inheritance, then your first home purchase is highly likely to be through a mortgage. If you’re looking to get a mortgage in Canada for the first time, it’s imperative that you know what the application process entails. Smarter Loans offers a list of Canada’s most reputable mortgage providers. Here are some helpful tips to help you get started:
Improve your credit score
In most cases, a minimum credit score of 680 is required by A-lenders in order for them to approve a mortgage in Canada. If your credit score is below 600, many lenders will consider you as a high risk, thus deny your application. Nevertheless, there are still few lenders who are willing to offer mortgage to people with poor credit, though at higher rates and strict terms. Therefore, it’s advisable that you work on improving your credit score if it’s low. This will boost your chances of getting a mortgage quickly and at better rates.
Decide whether to get a mortgage through a broker or a bank
One of the decisions you’ll have to make once you’re ready to get a mortgage is whether to get one through a broker or bank. When getting a mortgage in Canada, make sure you compare all the options available to you. There are pros and cons of either option, so it’s important to evaluate them both beforehand. The advantage of getting a mortgage through your bank is that you already have an established relationship, thus makes the process easier and quicker. On the other hand, a mortgage broker can do all the legwork for you.
Get preapproved for a mortgage
Most lenders will require that you get preapproved for a mortgage in order to determine the amount you can afford to borrow based on your qualification. During the preapproval process, you will be asked questions regarding your income, personal financials, and your credit score. It’s, therefore, important to have the necessary documentations, i.e. a formal letter that states your income, recent bank statements, and your credit report. The advantage of getting preapproved is that it gives you a clear picture of the mortgage you can afford and places you in a better position to negotiate.
Choose the ideal mortgage for your situation
There are different types of mortgages to choose from, and finding the one that is ideal for your situation is imperative. You have to choose between short-term verses long term, fixed verses variable, and open verses closed mortgages. Again, it’s important to know the pros and cons of each type of mortgage in order to choose the one that’s ideal for your situation.
With a high credit score, a stable source of income and 5% percent down payment, you can easily get a mortgage in Canada. Remember that even if you can qualify for a mortgage, it’s best to understand how big the payment is and see it in terms of the luxuries you’ll have to give up. In other words, you might want to consider running your budget to find the type of mortgage payment that fits your lifestyle. Don’t forget to visit the mortgage section at Smarter Loans – Canada’s Loan Directory, to make the smart mortgage decision.