Applying for a mortgage is never simple, but it’s even trickier when you don’t know what to expect. If it is the first time, you are planning to buy a house, you do have an opportunity to make the process easier on yourself by learning as much as you can ahead of time before you’ve found your dream home.
- Know Your Budget
If you want to qualify for a mortgage on your first try, it’s important to know how big of a loan you can reasonably afford. Lenders figure this out by looking at your debt-to-income ratio (DTI): the percentage of your income that you’re spending each month to pay your debts, among other things. For better understanding, use the services of the best Canadian Mortgage Payment Calculator for free.
Most lenders have two different sets of rules about your DTI. First, it’s favorable if you don’t spend more than 28% of your income on your mortgage payment. Another, your mortgage plus all your other debts shouldn’t eat up more than 36% of your income. You can speak to a lender and go through a quick assessment through the best Canadian mortgage affordability calculator and a simple pre-qualification process to understand more about the amount you can qualify to borrow and ultimately to determine your budget for a home.
- Improve Your Debt-to-Income Ratio
When applying for a pre-qualification, if you are told that you won’t qualify for a big enough loan to afford a house in your area, you can take steps to improve your DTI before you start house shopping. Simplest ways to achieve this:
- Increase Your Income
- Reduce Your Debt
Making more money isn’t always an option. For most people, it’s easier to improve their DTI by paying down other debts, such as credit cards, student loans, or auto loans. A steady source of income can protect you from any sort of penalties in the future too. To get an idea beforehand, you can always use the best Canadian Mortgage penalty calculator to understand the future penalties and work in a direction to save yourself from that.
- Find the Right Lender
There are three important things you should look for in a lender:
- A good understanding of the mortgage business.
- A good overall reputation.
- A good deal.
- Get Your Paperwork in Order
Once you’ve found the right lender, the last thing to do is to collect all the necessary documents you’ll need to apply for a mortgage. For instance, pay stubs from the past month, your tax returns from the past year, a few months’ of bank statements, credit card, and loan statements, and proof of your assets, such as retirement funds and other investments. You can also receive some tax exemption and to know more about any possibilities, you can check the best Canadian Land Transfer Tax Calculator.
Although nothing can completely guarantee that the process of your loan application will go smoothly. However, the more you are prepared, the easier it should be to get the loan you need on the home you want.
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