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If you’re looking to dive into homeownership, it’s important to be prepared at every step. Besides tracking interest rates and hunting for the perfect home, applying for a mortgage is the biggest step in the process. While it might seem stressful, it can be made much easier if you get your financial affairs in order ahead of time. Here are 7 ways to help get your mortgage application approved.

1. Check your credit score 

In Canada, credit scores run from 300 to 900 across five categories: Poor, Fair, Good, Very Good and Excellent. The exact categories vary based on which credit bureau is being used, but the process is essentially the same. Your credit score is a snapshot of your overall financial health, so it’s important that you know what yours is.

Mortgage lenders will use your credit score to gauge your financial trustworthiness and ability to repay your debts. The higher your credit score, the more likely you’ll be offered the lowest mortgage rates in Canada. Ideally, you want your score to be at least 660, but higher is always better. In addition to your overall numerical score, your credit report will also contain information about late payments, the number of accounts you have open, your overall debt levels and the length of your credit history. Making loan and bill repayments on time and not using too much of your available credit will generally leave you with a higher score.

You can check your credit score for free with several online companies. Online credit checks will pull your score from one of Canada’s two credit bureaus, Equifax or TransUnion. It’s a good idea to check your score each quarter, and do everything you can to increase your credit score.

2. Save a larger down payment

Buying a home will always require some amount of cash up front, also known as a down payment. The bigger your down payment is, the better, for a few reasons. The main reason is simply that the larger your down payment, the less you’ll need to borrow, and therefore the less interest you’ll pay. However, just getting approved for a mortgage relies on the down payment as well.

What’s the minimum down payment for mortgage approval? In Canada, there are minimum down payment requirements based on the home’s price: 

  • Less than $500,000: The minimum down payment is 5% of the purchase price.
  • $500,000 to $999,999: You’ll need 5% of the first $500,000, and 10% for the portion of the purchase price above $500,000.
  • $1 million+: 20% of the total purchase price at minimum.

In Canada, a down payment of less than 20% of the home’s purchase price requires the buyer to buy mortgage loan insurance. Paying these insurance premiums will increase your monthly mortgage payment.

Overall, you’ll want to save up as much as you can for your down payment. Of course, that’s easier said than done when homes in cities like Toronto and Vancouver can run north of a million dollars! However, the more cash you put down up front, the more likely you are to get approved by a mortgage lender. Using our mortgage payment calculator can help you test down payment and amortization scenarios, and compare variable and fixed mortgage rates. If you want to focus specifically on amortization alone, our amortization calculator allows you to try out multiple amortization scenarios and to see how different amortization periods might affect your monthly mortgage payments over time. 

3. Keep your income stable

While you’re applying for a mortgage, it’s important to keep your day job. Mortgage providers won’t approve your mortgage without proof you can make your payments. A full-time job is the best way to prove that, as it guarantees your income long-term. Having been with an employer for a long time will also help your application, though it’s not the only thing that matters. If you’re applying for a mortgage with your partner, both of you having full-time jobs is ideal.

Note that as long as the current economic uncertainty continues, the stability of your income is even more important than normal. The last thing you want is to take out a mortgage just before you lose a major source of income! However, given the recent volatility in the job market, you may also be in a situation where you get a job opportunity that’s very hard to pass up. In this case, you should read our piece on changing jobs while shopping for a home

If you’re employed on a casual basis, it might be worth looking for a permanent role for the duration of your mortgage application, even if it’s just part-time. Getting a great mortgage with a low rate can save you tens of thousands of dollars, so it could be worth finding some more stable employment while you finish your application.

If you’re self-employed, things can get a little more tricky. You’ll be required to provide details on your business and income for several years, proving that you’ll be able to stay profitable long-term in order to meet your mortgage payments. The best thing you can do to get approved for a mortgage if you’re self-employed is to get in touch with a licensed mortgage broker. Mortgage brokers have all the background knowledge you’ll need the prepare the best possible application.