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:
- Take your gross monthly income and then multiply it by 32%.
- There are mortgage calculators online that you can use to calculate mortgage payments.
- 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.
- 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.
- 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.