Lenders want to know that you can pay back your loan. To get a mortgage approved, you must show that you can carry a 5-year fixed-rate mortgage — no matter what type of mortgage you choose.
Top 5 things lenders look at
Your net worth – This is the difference between what you own (cash, investments, your home and other real estate) and what you owe (any loans or mortgages you already hold).
Value of the home you're buying – The lender needs to know your home is worth enough if it has to sell it to cover your mortgage debt. This is called the collateral for your loan.
Your credit score – Your credit report shows your record for paying bills and credit cards, and paying back loans on time.
The stability of your work and life situation
3 main risks for lenders
Interest rates can rise – People can't keep up their monthly payments.
Housing prices can drop – People who sell their homes may not be able to pay back their mortgages. Sometimes their home is not worth what they owe to the bank.
People can lose their jobs – Without mortgage insurance, they may quickly run out of money to make their monthly payments.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca
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