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They look at your income, down payment, assets, debts, credit, and the property itself. Income Lenders are looking for borrowers with a stable source of income. You’ll need to be able to prove that your income is sufficient to regularly make mortgage payments. If you’re a full-time salaried employee, you’ll be golden in the eyes of most lenders.
Since the income from your own business is less stable than a full-time salaried position in the eyes of lenders, typically you’ll need to be in business for a minimum of two years and provide Personal T1 Generals, Notices of Assessment and Corporate Financial Statements (if applicable) for the two most recent years.
If the funds are from investments or RRSPs, you’ll usually need to provide three monthly statements. If it’s from the sale of another property, you’ll usually need to provide a copy of the signed purchase agreement and a recent mortgage statement (if the property you’ve sold already has a mortgage).
Assets You’ll need to provide the lender with a summary of your assets, including chequing accounts, savings accounts, TFSAs, RRSPs, non-registered accounts, and vehicles. Although assets aren’t included in the calculation of your debt ratios, having substantial assets proves to the lender that you’re a responsible borrower. Imagine if someone has been earning $200,000 a year for 10 years, but doesn’t have any assets at all.
Has the borrower been spending every penny that they earn? Debts and Credit Debts and credit are related to each other. A lender looks at the types of credit you have, considers the outstanding balances and the payment status and also considers your credit score and credit history when evaluating you as a borrower.
A lender is generally looking for a borrower with a credit score above 670 or 680 with no late or delinquent payments. However, if you have late payments, or, in some cases, if you’ve filed for bankruptcy or a consumer proposal, you may still be able to get a mortgage.
Depending on the property and where it’s located, some lenders may use an automated valuation model (AVM) to determine the value of your property - Read more. (This is when a lender doesn’t need to visit your property to determine its value.) Other lenders may request a full appraisal. The property appraisal confirms the property is worth what you paid for it.
What to Consider When Shopping for a Mortgage While the mortgage rate certainly matters when shopping for a mortgage, it shouldn’t be the only factor you consider. Are You Going to Break Your Mortgage? When you sign up for a mortgage, breaking it is probably the last thing on your mind. Read more.
Some lenders have more flexible portability policies than others. One lender may only give you 30 days to port your mortgage, whereas another gives you 90 days. You’ll want to ask a lender about the specifics of its portability policy if that’s important to you. What About Prepayments? If you want to aggressively pay down your mortgage, prepayments are a must.
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