File your taxes on time
The first of our 6 mortgage tips is to file your tax return on time especially if you are self-employed or earn any variable income such as commissions or overtime. Lenders want to see the previous two years of income in all of these situations and if you are late they will not be able to qualify you for a mortgage using your income. Even if you are an employee some lenders will want to see your current notice of assessment to verify you have no income taxes owing.
Keep your credit score clean
Your credit score is a significant factor in obtaining a mortgage. There are several things you need to do to keep your score high. First of all make all of your payments on time. Don’t let them go even one day late. You need to also make sure you keep your balances on all of your credit under limit and preferably below 75% of your limit. Finally, make sure none of your accounts go to collection or are written off regardless of the amount.
Self Employed borrowers need to declare income
If you are self employed then you need to make sure you declare a decent level of income in order to get approved on a mortgage. If you write off a significant portion of your income as expenses then you will have a very difficult time qualifying for a mortgage at best rates and may be forced to pay higher rates or may not qualify altogether.
Make a major purchase after you get your mortgage
If you have a major purchase to make, such as buying a vehicle, it is really important to do this after you get your mortgage. Getting a loan with even a payment of $300 – $400 per month can reduce your borrowing power on a mortgage by $100,000 or more depending on the size of the payment. It is much easier to get a consumer loan than it is a mortgage so we suggest getting your mortgage funded first and then obtaining any loans after that.
Credit Cards and Lines of Credit – keep your balances low
Carrying balances on your credit card or unsecured line of credit can have a big impact on your mortgage qualification. We are required to use 3% of the balance as a monthly payment on any of these. So for instance if you owe $15,000 on credit cards or lines of credit this means we have to use a payment of $450 per month even if your payment is lower. This $450 payment will reduce what you qualify for on a mortgage by approximately $100,000 even though you only have $15,000 in debt. Keep these balances low or pay them off in full each month.
The last of our mortgage tips involves your down payment. Most lenders want to see bank statements for 90 days (a few only require 30 days) showing the funds you have for down payment. If you make any large deposits or move money between accounts during this period you will need additional proof of where that money came from for 90 days or proof of the source. It is best to have an account that you will use for the down payment and leave the funds in there for a 90 day period to avoid additional questions or paperwork requirements from the lender.
If you need more information regarding mortgages or if you need any advice on your personal situation please contact our office at 604-556-3893 or email at [email protected].
For more information on our mortgage products and your preferred Abbotsford Mortgage Broker please visit our website at www.ymscanada.ca.