November 6, 2008, 6:58 am

Key Points To Get A Mortgage

by: The Financial Blogger    Category: Banks and You,Personal Finance,Types of Financial Products
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With the recent credit crunch and the sub prime mortgage crisis, it will become more difficult to get a mortgage. However, there are key points that you can work on before meeting with your banker in order to present a clean application. Once you did your budget and that you know how much you can afford for a mortgage payment, the important part is to know what the bank will look for and try to improve those key points.

Cash Down for a house purchase

That will definitely be the first thing to look at if you plan to buy a house. The ear of 0% cash down mortgages is over and you better put money aside before meeting with your banker. A house cost always more than an apartment (for the same size) and saving money will be a good indicator if you can afford a house or not. In Canada, you can withdraw from your RRSP up to 20K per person in the case of a first buy. There are several techniques to increase your cash down and this topic will be discuss in a further post.

TDSR (Total Debt Servicing Ratio)

Your TDSR will definitely be another key point for mortgage qualification. In fact, your debt servicing ratio should not be over 35%, including your new mortgage payment. Some institutions will play with the numbers until 40% depending on the global picture. So you are better off consolidating your credit card into a personal loan and decrease our other debt before going to a banker. In order to calculate your TDSR, I suggest you click on the TDSR title to get a full post on this topic.

Credit Bureau

Do you make your payment on time? All the time? This is what the bank wants to know when you apply for a mortgage. Even though they are backed by a security, they certainly don’t want to repossess your house these days ;-). I actually created another blog exclusively on credit called The Credit Tool Box. You can go there for a better understanding of your credit bureau. I also write about building, improving or repairing your credit score.

Job History

If you are planning to do a career switch, I would suggest you do it after getting your mortgage. Employment stability is something banks love because it shows stable capability of making mortgage payments. The longest you have been in a job, the less (mathematically) chance you have to lose your job.

The next post on this series will be about different ways to have a sufficient cash down.

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[…] This technique is applicable to young couples with high income (young professional) who didn’t have time to accumulate cash down but have plenty of cash flow to reimburse their debts (line of credit and the new mortgage). […]