Ontario Mortgage Financing A-Z – What You Need to Know to Get Approved for the Best Mortgage

Ontario mortgage financing can be complex so it pays to be an informed consumer. If you want to get approved for the best mortgage, start doing research in advance of house shopping to make sure that you understand everything you will need to know. This will reduce the likelihood of finding a home and then finding out that you don’t qualify for Ontario mortgage financing. 

Before looking to buy a home, the first thing you need to know to get approved for the best mortgage is that you are going to shop around for a house that you can afford. Lenders will require that your mortgage payment does not exceed 32% of your gross monthly income. A great way to find out how much of a home you can afford to finance is to perform the following steps: 

1.       Take your gross monthly income and then multiply it by 32%.

2.       There are mortgage calculators online that you can use to calculate mortgage payments.

3.       Input the amount of mortgage that you are looking for and then compare it to your initial calculation of 32% of your gross monthly income.

4.       If your mortgage is producing a payment that is greater than the above calculation, reduce it until the monthly payment fits within the 32% guideline.

5.       The difference in the amount of the mortgage within the 32% guideline and the amount of mortgage you had initially planned on financing will be the increased amount of down payment that you will need to purchase a home at the amount of purchase you had initially intended. 

The above exercise may be a rude awakening but a worthy one because this will reduce the chance of making an offer and deposit on a home and then getting to closing only to learn that you cannot get a mortgage in the amount of money that you need. 

You also should request your credit report from Equifax and Trans Union. You want to ensure that you address any issue or errors on your credit report before making an offer and deposit on a home.

Another thing you need to know to get approved for the best mortgage in Ontario is that a bank will require you to verify your income on closing. This means that they may ask for a paystub and job letter. If your bank has any concern over the income verification that you provide, they may ask you to provide two years of Notice of Assessments from The Canada Revenue Agency.

The bank will also ask for proof of down payment. Proof of down payment consists of proof that you have the money for your down payment in the bank, proof of an investment or if the down payment is being made to you as a gift, they will ask you for a gift letter from the individual who is gifting you your down payment.

As a good rule of thumb, speak with a Mortgage Broker before you start house shopping. A Mortgage Broker cannot only prepare you for what will be needed to get approved for a mortgage but can also obtain a mortgage pre-approval from a bank before you start house shopping. They can review your credit and income to ensure that you qualify for a mortgage to finance a home and provide you with a list of the items that you will need to ensure that you can get approved for the best mortgage.

For more information about Ontario mortgage financing and what you need to know to get approved for the best mortgage please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

How to Get a Good Credit Rating to Get Approved for a Low Interest Mortgage in Ontario

If you would like to get approved for a low interest mortgage in Ontario, you will need to have decent credit. In Ontario and across Canada, if you plan to purchase a home with less than 25% down payment, you will have to qualify for high ratio mortgage insurance through The Canadian Mortgage and Housing Corporation (CMHC).

CMHC high ratio mortgage insurance insures the bank so that if you default on your mortgage, the bank can make an insurance claim for the money that they lose if they sell your home and there is a short fall. A bank in Canada cannot finance a mortgage with less than a 25% down payment without CMHC Mortgage Insurance. Mortgage investment corporations and finance companies that are not owned by banks can charge slightly higher interest rates.

This means that when you apply to get approved for a low interest mortgage in Ontario with a bank, your credit application will be scrutinized by both CMHC and your bank. If CMHC says that they will not high ratio insure your mortgage, then your bank won’t approve your mortgage financing.

Here is how you can get a good credit rating to get approved for a low interest mortgage in Ontario.

First, most banks have a minimum credit score requirement in order for you to even qualify for a low interest mortgage in Ontario, or any mortgage at all for that matter. The minimum credit score required by the bank is usually 680. This means if your credit score is less than 680, the bank may not submit your application to CMHC and may decline your mortgage application outright.

Many factors go into having a good credit rating. These factors include the number of applications that you have made for credit in any given calendar year, your payment habits, how you use the credit you have, the balances on your credit cards in proportion to your credit limits, the amount that you owe to your creditors and the amount of credit available to you.

If you want to know how to get a good credit rating to get approved for a low interest mortgage in Ontario, your first step is to know what’s on your credit report. You can request your credit report from Equifax and Trans Union online. If you request your credit report from Equifax, make sure to request a credit report that includes your FICO score because your FICO score is your credit score. Your credit report will show you what information your creditors are reporting to your credit report. If there is any information that is incorrect, file a dispute with the credit reporting agency online.

Even if you only have a single credit card that has a balance that is over 75% of your credit limit, work on a plan to pay it down below 75% below the credit limit. If you have a number of credit cards that you don’t use, close some of them. If you have a number of inquiries or late payments reporting to the credit report, this is a problem that only time can heal. You credit score will be impacted by credit inquires in the past 12 months, so if you have had many, you will need 12 months to pass without credit inquiries before your credit score reflects the improved behaviour. With respect to late payments, you will need at least 2-3 years of good payment habits after having late payments to see significant improvement to your credit score.

For more information about how to get a good credit rating to get approved for a low interest mortgage in Ontario please visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156.

Qualify for the Best Ontario Mortgage Rate by Organizing Your Finances and Having the Best Credit

Organizing your finances and having the best credit will ensure that you qualify for the best Ontario mortgage rate. When you apply for a mortgage with a bank, they will determine how hard they want to compete for your business based on the strength of your credit and finances. 

There are key criteria that the bank will look for when determining whether or not you qualify for the best Ontario mortgage rate. These include: 

1.       Your stability which is how long you have maintained employment at the same job and residence.

2.       The type of employment that you maintain and whether you are employed at a company or self- employed.

3.       Whether or not you can prove your income. If you are self-employed, they may ask to see your Notice of Assessments that you receive back from the Canada Revenue Agency when filing your income tax returns.

4.       Your gross debt service ratio (GDS) which is the amount of your housing payments balanced against your gross monthly income and expressed as a percentage.

5.       Your total debt service ratio (TDS) which is the amount of your housing payment plus your monthly payments to debts balanced against your gross monthly income and expressed as a percentage.

6.       Your overall unsecured debt load.

7.       Your assets and savings.

8.       The strength of your credit. 

Having the best credit will mean: 

1.       Having a minimum credit score of 680 which is also referred to as a beacon or fico score.

2.       Having at least 3 years of established credit.

3.       Not having too many inquiries for credit. The general rule of thumb is not more than 4 credit    inquiries in a given calendar year.

4.       Not having late payments to debt.

5.       Not having credit card balances that exceed 75% of the credit limits.

6.       Not having too much debt.

7.       Not having the ability to go into too much debt – too many credit cards and more. 

If you want to organize your financings and work towards having the best credit so that you can qualify for the best Ontario mortgage rate, we recommend that you take the following steps: 

·         Request your Equifax credit report to check your credit score.

·         If you have any credit card balances that are more than 75% of their limits, pay them down below 75% of their limits.

·         If you have more than 4 credit inquiries in the past year, wait to apply for your mortgage until the 12^th month of the oldest inquiry of the 4.

·         Close credit cards that you are not using.

·         Use mortgage calculators to calculate the mortgage payments. Figure out a mortgage amount that your bank will consider you can afford to pay each month.

·         Ensure that you can prove where your down payment is coming from. 

Taking these steps will help you to work towards having the best credit so that you can qualify for the best Ontario mortgage rate. For more information about how to qualify for the best Ontario mortgage rate, organizing your finances and working towards having the best credit please visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156.

Ontario Mortgage Pre-Approval – Too Much Shopping Around For the Best Ontario Mortgage Can Harm Your Credit

When planning to buy a home, it is a natural instinct to want to shop around for the best mortgage. The challenge is that too much shopping around for the best Ontario mortgages can actually harm your credit. 

When purchasing a home you may approach your bank for mortgage financing. Even when applying for a pre-approval, they will ask for permission to obtain a credit report. Your realtor may also offer to get you a competitive mortgage pre-approval and they will also ask for permission to obtain your credit report. You may even decide to research mortgage interest rates and deals online and may choose to apply to another financial institution and at that time you will have to consent to having your credit report accessed. 

When you provide consent to a financial institution, they will access your credit report on Equifax, Trans Union or both. Each time a financial institution accesses your credit report, an inquiry is reported to your credit report. 

Inquiries directly affect your credit score. Too many inquiries will make it appear to a perspective lender as though you are a credit seeker or perhaps are having a credit problem. The problem is that the financial institution will only see the date and the name of the financial institution on the inquiry. They will not know what type of credit you applied for. If a financial institution sees several inquiries in one month, Royal Bank, BMO, TD Canada Trust and CIBC for example, for all they know, you have applied for credit cards. Should you be approved for unsecured credit by all of the companies who have requested inquiries, then you may be in a position to go into more debt than what your credit report reflects on the date that a lender requests your credit report. 

The less inquiries you have on your credit report at the time you apply for an Ontario mortgage pre-approval, the better. Fewer inquiries are a sign of stability to a perspective lender and indicate that you are not a credit seeker. Too much shopping around for the best mortgage can actually harm your credit and your ability to get a mortgage altogether.

Generally, the credit score will be impacted based on the number of credit inquiries in the past 12 months. Usually any more than 4 inquiries in a 12 month period are considered a lot and will begin to impact your credit score. You can find out how many inquiries have been made to your credit report by requesting your credit report from Equifax and/or Trans union. Equifax’s data is most important because more lenders rely on Equifax data than Trans union. 

One way to reduce the number of inquiries to your credit report when shopping around for the best Ontario mortgage is to deal with a Mortgage Broker. A good Mortgage Broker will work with all of the banks and will pull your credit report a single time, then submitting it to the banks to obtain a competitive mortgage pre-approval for you. Mortgage Brokers are also often paid by the banks, so in many cases you will not have to pay them a fee. 

For more information about Ontario mortgage pre-approval and about how too much shopping around for the best Ontario mortgage can harm your credit please visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156