What Are The Possibility Elements Banks Verify Before Signing For A Mortgage?

Learning invaluable lessons from the battered and broken American real estate market and lending industry, Canadian lenders have tightened their restrictions and raised their qualifying standards for new mortgages.

Although average Canadian house prices have steadily increased over time, and mortgage lending rates hover near record lows, mortgage lenders have lost their tolerance for risk. In addition to all the standard criteria, banks may look into other details of your personal and financial histories. In order to assure your qualification, anticipate your lender checking

Your job security - This type of assessment does not always depend on how much your boss loves you or where you stand in this month's rankings of the company's employees.

You may hold all the records and own all the trophies declaring you as wonder-widget-worker of the world, but if the bottom just fell out of the worldwide widget market, a lender will look askance at your job security.

Time at your employer is also a factor, if you are less than 3 months on the job you most likely are subject to a probationary period which lenders do not look kindly at. Even if you can get your employer to confirm that you are not on probation your past employment history should reflect at least 2 years in the same industry.

For your own piece of mind look closely at your employment or industry if the forecasts seem grim, develop contingency plans so that you do not have to postpone your house purchase or put your new home at risk of foreclosure due to job loss.

Your credit score - Check with your lender to learn which of the several credit reporting agencies they use, and then request a copy of your credit report from that agency.

Experts say that approximately 25% of credit reports contain serious errors; and as many as 79% contain some type of error. Many contain flat-out frauds from fly-by-night collection agencies and predatory buyers of toxic assets. Take bold and aggressive steps to purge and cleanse your credit report, talk to the credit company, and if needed retain an attorney to work with reluctant creditors.

Take similarly aggressive steps to pay-off small obligations or any balances over 50% of the allowable limits, protecting yourself against nickel-and-diming your debt ratios out of their proper proportions.

Because banks and other mortgage lenders very strictly enforce the letter of their rules, a couple of credit score points may disqualify you or raise your interest rate if you are close to the banks minimum guidelines.

You can get a copy of your credit report directly from TransUnion or Equifax (the two credit reporting agencies in Canada) without registering an inquiry on your record. Too many credit checks, or inquiries, from different lenders do affect your score after all. Visit them at  and

Your net worth - Your credit report alone does not include enough information for the lender accurately to assess your credit-worthiness.

It does not, for example, give much information about your savings and retirement accounts, properties you own, or equities you control.

If you have average cash flow and debt ratios but your net worth is considerably more than the average Canadian family's, you may actually qualify as a "preferred borrower."

Naturally, the converse also applies : If most of your numbers fall into the normal parameters but you have forfeited most of your assets for the sake of retiring old obligations, your smaller-than-average net worth may affect your down-payment requirements or your interest rate.

Your debt ratios - Ask your lender about how he calculates your debt ratios. In general lenders stick to an industry standard calculation where your monthly income and expenses follow a 32%/40% ratio.

What that means is that the cost of carrying the actual mortgage you may need (PITH: Principal and Interest payments on a mortgage + property Taxes + Heat + home insurance) do not exceed 32% of combined take home income.

Also calculated is the PITH + the cost of carrying your current outstanding debts such as loans, lines of credit, and credit cards. This value should not exceed 40% of your combined take home income.

These numbers do have room for exceptions to be made but the rest of the above mentioned risk factors must be  sum up the above be aware of how the banks lend their mortgage monies.

Unless you have 100% down payment for your purchase you will need the banks to approve and lend you money to make that dream home a reality. There are steps to take to ensure your application is in the best shape to merit the lowest available rates in the industry.

If however you find that you may be falling short in one or two places don't despair, there are programs out there to help you get into a home the drawback may be a higher rate.

These programs often are set up for 1 or 2 years, enough time to get back on track and re-apply at that time for the "Triple A" lending rates. A qualified Mortgage Agent has the tools and experience to evaluate your unique situation from as early as the point you first decide you want to buy a home.

Contact one before you make any other plans as they can evaluate and advise you on how the above risk factors can be managed. In some cases a few months of preparation can save you thousands in mortgage payments over your mortgage term.

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