How to Qualify for a Mortgage

Posted on 28 December, 2012

If buying a home is in your future plans, it may be the right time to begin planning. However, a common question is; how do I qualify for a Mortgage? Ultimately, the Mortgage qualification process is not equal in every case and many factors will impact an application.


Credit score and credit history are a key component reviewed during the Mortgage Approval or Decline stage. Both credit score and credit history go hand in hand, one’s credit score is determined by their credit history. Typically, Lenders prefer to see credit scores of 640 or higher. However, in some cases, a client may have a credit score of 820 but their credit history shows flaws and raises too many risks for the Lender. Therefore, the client is declined for their Mortgage. If you speak with a financial advisor or one of our Mortgage Associates they can sit down with you and review your credit to determine whether or not a Mortgage Loan would be possible to obtain.

Debts and Income

There are two ratios that lenders use to determine if a client is Pre-Approved; and if so, for how much.

Ratio 1: Gross Debt Service
This ratio determines how much of your Gross Annual Income can be used to cover payments associated with housing. These payments include Mortgage Principal & Interest, Property Taxes, Heating, Condominium Fees and occasionally, Secondary financing. A Lender prefers to see no more than 30% of an annual income figure committed to housing repayment.

Ratio 2: Total Debt Service
This ratio determines the percentage of Gross Annual Income required to cover payments associated with housing as well as any other outstanding Debts. These items can include Car Loans, Credit Cards and Unsecured Lines of Credit etc… Most Lenders use a figure no higher than 40% of an annual income figure to factor into their decision.

To see if you would qualify for a Mortgage, call to book your free Sherwood Park Mortgage Review with one of our Mortgage Brokers today!

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