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What do expect when applying for a mortgage?
The following information on the approval process is applicable to borrowers who are salaried employees.
1). Your ability to make the monthly payment
A mortgage lender examines the past and present annual gross income of a borrower, and the likelihood of him receiving this income in the future. This helps determine whether a borrower can afford to make the monthly mortgage payment for the full term of the mortgage. A mortgage may be a conventional (with 20% down payment) or high ratio mortgage (less than 20% down payment). Mortgage approval by lenders involves the examination of 2 debt service ratios when the lenders are under-writing their mortgage applications:
a). Gross debt service ratio (GDSR)
Your monthly payment on housing costs including principal, interest, property taxes, utilities and condo fees if any, should amount to no more than 32% of your gross monthly income.
b). Total debt service ratio (TDSR)
Your total monthly debts payment including housing costs, credit cards, line-of-credit and loans should be no more than 40% of your gross monthly income.
2). Your credit worthiness
This is an important factor when Vancouver home mortgages are granted to the borrowers. The banks that review your loan application before your mortgage approval examine your credit history and credit worthiness. If you have poor or bad credit history, your bank may not approve your application for a mortgage.
3). The property
The quality of a property to be used as a security is critical consideration by a mortgage lender. The property has to be suitable and offers adequate values as collateral/security against the mortgage loan. Leaky Condos and properties previously used for grow-ops (and not rectified and certified as suitable as a dwellings) are not likely to be approved for mortgage financing. Properties in poor repair may not be acceptable to be used as securities for the mortgage loans.
4). Down payment confirmation
The source of funds for the down payment is required to be from borrower's own resources. This could be from accumulated savings, sale of existing property or gift money from family members so long as there is no requirement for repayment. In addition a is required to show closing costs in the amount of 1.5% to 3% of the value of the property.
If you are interested to find out more information on how to apply for a mortgage, kindly contact James Wong at 604-721-4817.
