Qualifying for a mortgage

[Iceman_19]

What is required these days? I read about the changes that will be coming in March, but what do lenders look at? What kind of credit score, etc?

[Xtrema]

Talk to a mortgage specialist and see what you can be pre-approved for.

Usually they want proof of income at the very least.

[Iceman_19]

Proof of income of how long? I am not planning to get into a mortgage for a while, probably a year, so I was just curious what it takes.

[el-nino]

This is going to sound cheezey but lenders look for the 5c's of credit:
The five key elements a borrower should have to obtain credit: character (integrity), capacity (sufficient cash flow to service the obligation), capital (net worth), collateral (assets to secure the debt), and conditions (of the borrower and the overall economy).

I hope that helps.
Matthew Kee

[Mys73ri0]

Originally posted by Iceman_19
What is required these days? I read about the changes that will be coming in March, but what do lenders look at? What kind of credit score, etc?

if this is the extent of research you're gonna do before getting a mortgage, you're gonna end up like this guy http://forums.beyond.ca/st/307571/my-house-co-owner-has-refused-to-pay-any-more-of-the-mortgage/

Even then, there's a huge 4 page thread on this topic as it is.
http://forums.beyond.ca/st/325183/canada-unveils-new-mortgage-rules-again/

[Iceman_19]

Yes, this was the extent I was going to do. I was even going to see if someone on beyond could take care of doing all the work for me. :rolleyes:

[kkhakh]

Iceman: Currently they are looking at three things. Credit, Income, and Down Payment. Pretty much everything falls into one of these categories.

I would suggest starting the process way ahead of time just to see if you need to improve credit or increase down payment to acquire a place in a set price range. Contact your mortgage broker, so you can enter the process of buying a home well informed and educated. You're going to need to know much more to make the correct choice for you and your lifestyle!

[Darkane]

When I when in for one my broker explained this:

If your Credit score is above 680 it moves you to 40% gross. If below its 32%.

I think that's what it was. Also three years ago so I don't know if it changed now.

[93mr2gt]

Absolutely they look at 5C's of credit.
Capacity is one of the major ones they look at. GDS ideally should be under 32, TDS should be under 38. Alot of time they will boost those up to about 34 and 40, anything above that, unless if you dont require CMHC, it might be harder to get approved on.


As long as you have no collections, bankruptcy filing and major derogatories on your credit bureau, you are pretty good, unless if you are maxed on all your tradelines, that might not look too good, but ya, above 680 is slightly above average.

[Calgaryrocky]

Everybody is right about the 5 Cs of credit.

Don't get hung up on the 680 beacon score, I have approved mortgages for people with a credit score much lower then that. It depends on the overall strength of the application.

Some things you should be keeping in mind are:

Job stability - How long have you been at the current employer, if self employed how many years of industry experience and what is the ongoing job stability.

Credit history - How have you handled your debts in the past and what credit facilities have been issued to you in the past. Any late payments, collections or other derogatory messages are bad.

Down Payment, will you be requiring high ratio mortgage insurance through CMHC or Genworth (less then 20% down).

Net worth - Do you have an established savings or investment portfolio. Creditors are not necessarily looking for million dollar net worth clients but more so looking to see whether or not your current net worth fits with the financial picture you present, ie according to your age/income bracket/marital status does the value of your net worth make sense.

Most important is affordability, can you afford to make the payments. Your are allowed a maximum GDS (Gross Debt servicing) ratio of 32%. This would be your shelter costs so mortgage payment, taxes and heat. As well as a TDS (Total Debt Servicing) ratio of 40%. This would be the obligations included in the GDS and all other monthly obligations (credit cards, loans etc.) There are always exceptions to these rules, for example if you have a beacon of 680+ and you are applying for CMHC/Genworth insurance they disregard GDS and allow a maximum TDS of 44% for most of their programs.

I hope that info helps, let me know if you need any specific info or if you want to do a rough pre-qualification.