1. You will be able to make your monthly payment on a timely manner.This is most
important because lenders hate the hassle to take you to court.
2. In the event that you default, the lender is able to recover his money by
selling your property.
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What Lenders Look For In Your Application Form
1. How fiscally responsible you are:
Lenders will obtain a "Credit Report" which will give a history of your payment record.
For example your report may show:
a. if you had been slow in your credit card or car loan payment
b. if you had a debt you did not pay off or if you had been bankrupt.
c. if you are over your credit limit with your current lenders.Your credit score
improves if you keep your borrowing within 75% of your credit limit with the lender
d. Conversely if you pay on time, it will show positively on the report.
The Credit Bureau Office which keep record of your credit behaviour, assign a credit
score to your account. The higher the score the better you are.
If your score is under a minimum threshold, the lender will decline your loan
It is therefore in your best interest to behave responsibly with all your debt obligations.
Most Banks, Trust Company and Credit Union use approximately the same threshold.
However there are other lenders who will accept higher risk and lower threshold but
they compensate themselves by charging a higher interest rate.
You can learn more and obtain a free copy of your own Credit Report at Equifax:
Please Click here.
2. How stable is your job:
The lender hates if you keep changing job.
The lender will look at your position, length of employment, the stability of your industry,
the stability of your employer, your income level.
The lender will ask you to provide a letter from your employer confirming your position,
length of employment and salary. sometime the lender may instead accept a copy of your pay-stub
as confirmation of employment.
3. Can you make the monthly mortgage payment:
The lender will add your gross income from all sources and add all the expenses associated with the
mortgage you are applying for.
Total expenses should not be more than 32% of your total gross income.
This is your Gross Debt Service Ratio (GDSR).
The lender will also add all the expenses associated with the
mortgage PLUS all your other debt obligations such as credit card payment,
car loan payment.
Total payments should not be more than 37% of your total gross income.
This is your Total Debt Service Ratio (TDSR).
Most Banks, Trust Company and Credit Union use approximately the same GDSR and TDSR ratio.
However there are lenders that will accept a higher ratio and compensate themselves
by charging a higher interest rate.
It is possible that you have a big monthly payment that you need to make under a loan. This
big payment will adversely affect your TDSR. In many instances you can get rid of this
huge payment by paying it off from new borrowing under a mortgage loan.
4. Appraisal Report:
If your application is now approved. The lender will now like to know if the property you have
purchased is really worth the purchase price.
The lender will ask your permission to proceed with an appraisal report. Borrowers pay the
appraisal fee but often due to competition the lender may absorb the fee. Just ask.
The lender may turn down your application if there is unsatisfactory comment on the report
such as: dilapidated state of the property, unsatisfactory neighbourhood.
If the appraised value comes in lower than your purchase price, the lender will either reduce
your loan amount or proceed as a High Ratio Mortgage.
5. Lender's Mortgage Offer:
If everything is fine, the lender will issue a written mortgage offer letter describing all
the details about the mortgage for your acceptance.
6. Registration:
The lender will forward a mortgage instruction letter to your lawyer to prepare the
mortgage document for your signature.
7. Advance of Fund:
On closing date, the lender will advance the fund to your lawyer who will make payment
to the property seller on your behalf.
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