Qualifying for a mortgage.

​When qualifying a client for a mortgage lenders typically look at four key areas. The stronger a client is in each area, the likelihood of qualifying increases.  
​Income - Depends on how you earn your income, length of time in the same industry and being able to show it on paper. 2 years minimum is preferred. See below for specific income types.
Credit Score - Ranges from 400 to 900. To qualify for a mortgage with less than 20% down, you need a minimum beacon score of 600. Once over 700 clients have access to best rates. An important factor is to ensure you have at least two trade lines (car loan, credit card, lines of credit, personal loan, etc) for a minimum of 2 years. That helps establish and show that you are able to pay your bills on time over a longer period.    
Down Payment - In Canada the minimum down payment must be at least 5%. The bigger the down payment, the less insurance premiums a client has to pay. If you put 20% down, you avoid CMHC and insurance premiums altogether and have access to even more mortgage lending options. Down payment can come from gifts from family (in most cases), investments, RRSP's, inheritance, a confirmed sale and a few other sources. It's important that you can prove the source on paper. Typically lenders want to see 3 month bank statements or investment history to see where your down payment is coming from. 
Qualifying Ratios - This is the aspect of the mortgage qualification process that is the least understood by clients. Even if a client makes a high salary, they may not be eligible to purchase a home due to outstanding debts and the monthly payments. Qualifying ratios take into consideration your entire picture. Your income, compared to your debts and include heating costs, taxes and other monthly obligations. Depending on your credit score, the maximum combination of property taxes, mortgage payments and monthly liabilities cannot exceed more than 44% of the gross family income.