5 Tips To help You Qualify For A Larger Mortgage

Are you trying to qualify for a larger mortgage?

Here are 5 tips to help you increase the amount you’ll qualify for.

Tip 1: Decrease your Credit Card Debt/Revolving Debt

Credit Card debt and Line-of-credit debt is classified as “revolving debt.”

When you apply for a mortgage and you have a balance on your credit card or line of credit, we as loan officers are required to figure out what your “monthly” payments are.

We Calculate all Revolving Debt balances at 3%.

Let’s say you have $20,000 in credit card debt, or on a line of credit, that equals a $600 per-month payment! These theoretical payments can erode much of your mortgage qualifying amount.

(If your line-of-credit is over $50,000, you may get special treatment with how it is calculated. Speak with a mortgage broker)

Tip 2: Keep Your Credit Report Clean

Do you make payments on time? Do you keep your credit card balances low? If you have a great credit score, you will qualify for the maximum amount possible. A credit report is based on a number of variables, but the 2 categories that make up 80% of the calculation are: repayment history, outstanding debt utilization. For example, if you have never missed a payment, but all your credit cards are maxed out your credit score is going to be negatively impacted. The vice-versa is true as well.

The easiest way to ensure you never miss a payment is by setting minimum payments on all your bills. This way, if you end up going to Thailand for 2 months, you’ll never have to think about making that minimum 15$ payment

Tip 3: Lower your Student Loan Payment

Do you have a student loan? This payment may be hindering the amount you can qualify for. One option many first-time home buyers take advantage of is extending their loan amortization. The Government of Canada allows students to extend their amortization up from 10 years to a maximum of 14.5 years.

In the long run you will end up paying more interest, but the lower monthly payments may be what’s needed to get you into your dream home.

Tip 4: Sell your car? (Eeek)

Of course, this is easier said than done, but if you are financing a vehicle those monthly payments could be using up much of your mortgage qualifying room. If you are fortunate enough to live in a city with great public transportation (is it ever great? How about acceptable public transportation). Decreasing your vehicle financing will increase your qualifying amount. After you are comfortably in your new home, you can once again go vehicle shopping.

Tip 5: Guarantor or Co-signor

If you are fortunate to have a guarantor or co-signor to help with your purchase, their income is added to the mortgage application and could help you qualify for a larger mortgage. In some cases, if our signor has too much debt it will hinder our application and it will be better to leave them off.

There you have it! 5-tips to help you maximize your mortgage qualifying amount.

Pro-Tip: Before deciding to purchase the maximum amount of house possible, try living for 6-months with the proposed payments. At the end of 6-months if you are happy with your lifestyle, then I say go for it!

Thanks for reading, if you have any questions please send me a message: adamsale@dominionlending.ca

Cheers,