Three Pillars of a Mortgage Approval
While most lenders look at dozens of variables and factors when determining whether or not to approve your mortgage application, they can all be summarized into 3 pillars. These 3 pillars will not only determine if you get approved, but they will determine what rate you will receive.
Remember that these are guidelines only. We can arrange for exceptions in many cases.
1. Down Payment or Equity
Simply put, this pillar determines how much of a risk the bank is taking on your property. You have to realize that a bank is thinking one thing only - "If I have to foreclose on this property, will I lose money?" With that in mind, it is easier to see why a bank scrutinizes a mortgage application with 5% down payment much more than one with 30% down payment.
2. Your Employment
Lenders typically want to see the history of where you have worked for the past 3 years. If you are Self Employed, then they usually want to see the past 2 years of tax returns. With Self Employment however, there can be many exceptions that many banks don't use. We know which lenders will allow exceptions.
3. Your Credit
Each mortgage application must include your credit report. Your score will largely determine your interest rate.
Basically, the lender wants to see what your history is with regard to paying your debts. If you always pay your monthly payments on time, then this will not be an issue for you.
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