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Frequently Asked Questions on Qualifying for a Mortgage

How do I qualify and get approved for a mortgage? What is the mortgage process?

The first step in the mortgage process is for you to fill out a mortgage application and to speak to us. This will enable us to understand your qualifications, situation and goals. Next, we pull out your credit bureau and compute the amount you may qualify for based on your income and liabilities. We then take all this information into consideration when looking at different lenders’ products, to see which option is a perfect match to what you need. If there are issues that may come up and cause problems getting you approved, we will work with you or suggest solutions to help you qualify.

The application process may start before or after you have found a property. Doing it before helps you find out how much you can afford to pay for a home and enables you to get a rate-hold for up to 120 days if you pre-qualify. Whether you are doing it before or after finding a property, make sure you make the offer "subject to financing approval satisfactory to the buyer." When we submit your application to the lender complete with the property details, the lender underwrites the deal. After they deem that it meets their lending guidelines, they issue a mortgage commitment subject to their conditions. We then collect from you supporting documents to prove your income, assets, down payment and other matters to satisfy conditions on the mortgage commitment.

Once all your documents have been submitted and approved, the lender will remove conditions on your mortgage commitment and you may remove financing conditions. Your purchase is firm when you remove all other conditions on your purchase. After the lender sends instructions to your lawyer, you will then be asked to come in the lawyer’s office and sign the prepared mortgage documents and give the rest of the funds to close the deal. The deal is complete when the funds are released to the sellers and the property is transferred to your name.

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Why is there a need to pull my credit bureau?

When you sign a mortgage application, you authorize your bank or your mortgage broker to pull up your credit bureau. Credit history is required no matter where you go to apply for your mortgage. Your credit rating, for the most part, determines how much interest you will pay for your mortgage. It shows your history regarding your debts and whether you have made your regular payments on time.

It is in your best interest to check your credit from time to time and make sure it is accurate before your bank or broker sees it. Any inaccurate information may affect your ability to get the best mortgage, or even your chances of qualifying for one. Correcting these errors is a good thing before you go to apply for a mortgage. The best thing to do is to speak to us if you need help. Sometimes, we can also suggest things you can do that can help mitigate problems with your credit.

Check out our website’s section on how to check your credit. It will also let you know what you can do to correct any discrepancy or inaccurate information. Alternatively, you may also subscribe to a service like Credit Alert that sends you your credit report from time to time.

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When do I actually know I got an approval to remove financing conditions on an offer to purchase a property?

Never waive financing condition until all conditions in your mortgage commitment have been met or likely to be met without issues. There is nothing worse than closing on a property only to discover there is no mortgage because you failed to meet mortgage commitment conditions.

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What is the difference between pre-qualification and pre-approval? When do I actually know I got an approval to remove financing conditions on a property?

Pre-qualification calculates the amount you can qualify for based on your income and total debts. It does not take into consideration your down payment, source/quality of income and credit history.

Pre-approval is more significant than a pre-qualification, although it is not without its own shortcomings. Getting pre-approved "normally" means the lender approved you after reviewing and accepting your credit score, written income verification and proof of down payment availability. Having a pre-approval allows you to buy more confidently knowing not only what home price you can afford, but also that your rate is protected for a specified period of time in case interest rates go up. It also allows you to get the lower rate if rates go down. Moreover, it sometimes helps negotiate a better price with the sellers because it shows the buyer to be "strong" and serious enough with their offer for having a pre-approved mortgage.

If you get an approval subject to satisfactory credit history, income and down payment verification, then this approval is not considered "firm" enough and is not that much more significant than a pre-qualification.

The biggest caveat is that you can get a pre-approval, but if the property you bought does not mean the lender guidelines, you may not get a mortgage approved. That is why even if you are pre-approved, any offer you make on a property should still be "subject to financing approval satisfactory to the buyer." This will allow the lender to verify if the property meets their standards.

The best thing to do is to call us. Having a professional mortgage broker by your side will help you avoid costly mistakes.

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How much can I afford to pay for a home?

Generally, lenders allow you to use 32% of your gross monthly income for shelter costs which includes monthly mortgage (principal and interest) payments, property taxes and heat. If you have other debt obligations, depending on the lender, you are allowed anywhere between 40 to 44% of your monthly income to pay both your shelter costs and debt payments, unless using 32% of your income without considering other debts is lower. You may use our affordability calculator under Mortgage Tools to find out what mortgage amount you qualify for and how much payments you can make every month. If you are paying condo fees on the property, lenders use only 50% of the fees to add to shelter costs. Please note, the calculator does not take into consideration a lot of factors in your application. You may qualify for a higher or lower amount depending on your qualifications. The best thing to do is to give us a call or send us an email using information in our contact page so we can do a thorough review of your situation after you apply and let you know how much you can actually afford to pay for a home.

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Can I qualify even if I am self-employed and/or do not declare income?

Yes, we have programs for people who are self-employed or have stated incomes. The incomes stated must be reasonable for what is being done as a self-employed person and more often, lenders also look at the length of time you have been in the same industry you’re self-employed in.

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My bank turned down my mortgage application because of bad credit. Can I still get approved for a mortgage with another lender?

While having a good credit score is essential to getting the lowest rates, we look at the "total picture" of your qualifications and goals. Even with a lower credit score or bad credit, we may still get you in a program that makes it possible for you to get approved for a mortgage. Alternately, we can recommend a solution to fix your credit and/or bring up your score within an acceptable time frame so you can get a better mortgage.

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What kinds of documents will you require to approve my application?

After filling out the application, most lenders will typically need supporting documents to prove your sources of income, tax assessments, liabilities, down payment availability and information about the property you are buying. Other additional documents may be required by lenders depending on their need to verify certain aspects of your application. For a checklist of typically required documents, go to the Client Resources section of our site.

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May I still make changes to my application (e.g. term, payment frequency, etc.) once it has been submitted?

Yes. When we submit your application, we have already done all the necessary computations to make you qualify within the lenders’ guidelines. Any changes you want to make may be approved if they still make the computations and/or results fall within those guidelines. Sometimes, they may be beneficial and worth considering.

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Why is it important to know whether or not you qualify for mortgage insurance?

Most lenders can lend only up to 80% of the value of the property if the mortgage is not insured. If you cannot qualify for mortgage insurance with CMHC, Genworth or AIG, and you have less than 20% down payment, then your only other option may be to get secondary financing, or obtain gifted funds to add to your down payment. In a lot of cases, secondary financing has higher rates and fees. The best thing to do is to give us a call to explore what types of options you may have.

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What do I need to transfer my mortgage?

You need to get from your lender a copy of your last mortgage statement as well as the Mortgage Discharge statement showing the mortgage balance upon maturity or discharge date, and the per diem rate.

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Can I still qualify for a mortgage if I have declared bankruptcy in the past?

It all depends on how long ago you have declared bankruptcy, what the circumstances were surrounding that event and in most cases, and if you have re-established credit for a period of time after bankruptcy discharge. Normally, lenders require at least two years from discharge date before they will consider approving your mortgage. You may check out our section on how to reestablish credit under "Your Credit Rating" which is found in the "Learn More About" section of the site.

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How does child support or alimony affect my qualification for a mortgage?

If you are receiving child support or alimony, this amount will be added to your income. If you are the one giving child support or alimony, this will be deducted from your income. Either ways, the resulting income amount is then used to determine how much mortgage you may qualify for and approval will be based on you providing written evidence that payments/receipt were made regularly for the child support or alimony, as well as a copy of the divorce agreement.

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Can I get a Canadian mortgage even if I am not a Canadian resident?

Yes, you may get a mortgage for a property in Canada even if you are not a Canadian resident but some conditions will apply. For additional information, please call us at 1-888-853-8372 or email us at contact@canadamortgagehub.com.


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