What to do if you’re not approved for a mortgage loan!
There are several factors that contribute to a declined mortgage application, or an approval that’s lower than what you were hoping for! We’ve put together a list of potential factors that could affect your mortgage approval, and a few tips on how to improve your financial health so you get approved on the next application!
Credit Score & History
Your credit score is one of the biggest determining factors when applying for a mortgage, and there are two parts to it! First, the number of your score. Second, your credit history which is basically your track record for making payments on time, missing payments, or late payments that are reported to the credit bureau. If your credit score is the reason your credit application was declined, check out our blog on how to improve your credit score here!
Income Vs. Mortgage Loan Amount
If you’re applying for a mortgage out of your budget some online tools may decline your application! It’s a good idea to talk to one of our preferred mortgage specialists to check out all aspects of your income and mortgage amount you’re applying for. This especially applies if you’re self-employed, on a probationary period for work or even work a commission-based job. All these aspects should be considered when applying for a mortgage! The more proof of income you can show to the bank, the better!
Financial Qualification
When you apply for a mortgage, your lender is required to oversee all aspects of your application, including your down payment source! This is a mandatory process that prevents money laundering and other fraudulent transactions. If you receive a down payment from a family member or an unverifiable source, your mortgage could be declined due to lack of proof!
Debt Vs. Income
In Canada, your total debt should not exceed 45 percent of your total gross income! If your debt is over 45 percent of your total gross income, your mortgage will not likely be approved. Even if you have great credit and you manage your debt responsibly–you’re still required to have a total debt service ratio (TDS) under 45 percent! Read our Savings 101 blog on tips and tricks on how to save money and pay off debts faster!
Have questions?