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:
- Your stability which is how long you have maintained employment at the same job and residence.
- The type of employment that you maintain and whether you are employed at a company or self- employed.
- 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.
- 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.
- 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.
- Your overall unsecured debt load.
- Your assets and savings.
- The strength of your credit.
Having the best credit will mean:
- Having a minimum credit score of 680 which is also referred to as a beacon or fico score.
- Having at least 3 years of established credit.
- Not having too many inquiries for credit. The general rule of thumb is not more than 4 credit inquiries in a given calendar year.
- Not having late payments to debt.
- Not having credit card balances that exceed 75% of the credit limits.
- Not having too much debt.
- 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 12th 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.