5 Things to consider when going through the mortgage approval process in Oakville
Mortgage approval is an essential step in the home-buying process. Most lenders in Oakville will require you to have a pre-approval letter. A pre-approval shows the amount you can spend on a house. While your credit score is crucial, there are other factors that lenders take into consideration during the mortgage approval process. These factors are often interlinked, meaning you can organize them before submitting your application. Here are five things to consider when going through the mortgage approval process in Oakville.
Credit Score. Your credit score gives lenders an insight into your credit history and habits. In Oakville, most lenders require a credit score of 620 or higher to approve your mortgage application. Financial institutions often reserve the lowest interest rates for clients with a 760 or higher credit score. However, you can pay a large down payment if you wish to apply for a mortgage with a low credit score. Your lender can also work with you to suggest ways to improve your credit score.
Employment History. Lenders in Oakville will want to ensure that they lend only to those with stable employment. Most lenders will want to see your pay stubs or call your employer to verify your employment and salary. If you recently changed jobs, a lender can call your previous employer. If you are self-employed, you must provide additional paperwork concerning your business and income. Some of the factors that lenders consider when approving a mortgage for self-employed people include the stability of income, location of the business, and the demand for the company's product.
Proof of Assets. You need to provide your bank and investment account statements to prove that you can afford to pay a down payment, closing costs, and cash reserves. The down payment may vary by loan type. However, most loans will require you to purchase private Mortgage Insurance (PMI] or pay a mortgage insurance premium. Suppose you identify a property or you want to renew your mortgage. In that case, your lender might want to analyze the property to ensure it is worth enough to provide security for your mortgage. The bank may want to view the property, listing on MSL, or obtain a property appraisal. Some may also require a home inspection to determine the fair market price for your property.
Debt Service Ratio Analysis. Before approving your mortgage, your lender must ensure that you can carry a mortgage. Debt service ratio analysis compares your debt to your income to ensure you can afford the mortgage you want. Lenders in Oakville will require that your housing cost, taxes, and heating expense are no more than 32% of your gross monthly income. If you are a new buyer or your down payment is less than 20% of the purchase price, your lender will require that your housing cost is no more than 40% of your monthly income.
Documentation. Lenders will need to copy your driver’s license, your social security number, and signature. These documents allow them to pull your credit report. Your lender may also request other documents during the mortgage approval process.
Ensure you consult with a reliable mortgage broker such as Altrua Financial to save yourself from a lot of heartaches.