What you should know before applying for a mortgage

• The best time to apply for a mortgage
• Important things to consider when applying for a mortgage
• What you need to know about your credit score

Buying a home is one of the most exciting investments you can make for your family and future. But you may not be exactly sure how to get started and how to get a mortgage. Not to worry. We’ve got you covered – here’s what you need to know about applying for a mortgage.

When is the best time for you to apply for a mortgage?

Many factors come into play when you’re deciding when is the best time for you to get a mortgage. Some major things to consider are your down payment, the current rate environment, and your personal situation and needs.

Down payments

A mortgage down payment is the amount of money you can pay upfront when purchasing a home. It’s expressed as a percentage and is calculated as the dollar value of the down payment divided by the home price. In Canada, there is a minimum down payment required, which depends on the home's purchase price.

With owner-occupied homes, if the purchase price is less than $500,000, the minimum down payment is 5%. If the purchase price is between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000 and 10% of any amount over $500,000. If the purchase price is $1,000,000, then the minimum down payment is 20%.

The current rate environment

Another factor is the current rate environment at the time you’d like to purchase your home. Interest rates fluctuate depending on economic factors, such as the time of year. The Bank of Canada (BoC) sets the prime rate, which is the benchmark rate, and other financial institutions base their rate off the prime rate. A low-rate environment is a favourable time to get a mortgage since you’ll be able to save on interest.

Your personal situation and needs

Most importantly, take a good look at your personal situation and needs when deciding whether it’s the right time to get a mortgage. Look at your debts, your income and even your estimated utilities fees. Review all your expenses! Again, if you and your family have been saving, it may be the perfect time to see what you could qualify for.

A few things to consider when applying for a mortgage

It’s best to look at the different types of financial institutions you can get a mortgage from before making your final decision. There are a number of different mortgage sources, like mortgage brokers, banks, and alternative lending companies to choose from. It’s important to weigh your options, look for the best prepayment privileges so you can pay off your mortgage faster, and for the best rates. Here’s a bit more information about common mortgage providers.

Mortgage brokers

Mortgage brokers don’t lend money directly to you, but they arrange transactions by finding a lender for you. Since brokers have access to a number of different lenders, they may give you a wider range of mortgage products and terms for you to choose from.

The downside of a broker is that they may not have access to the same lenders, so the available rates will vary from broker to broker. They also work on commission, so you’ll need to choose a broker you trust to have your best interests in mind.

Banks

If you’ve been a customer at your bank for years, there is a trust associated with that bank. But while it might be convenient and familiar, they may not be able to offer you the best rate. They may have less rate flexibility than newer, alternative options entering the market and you often need to visit a branch in person.

QuestMortgage

QuestMortgage is the better way to get a mortgage. Our BetterRate ^® mortgages can help you save up to thousands of dollars on your mortgage, so you can keep more of your money. You can apply completely online 24/7 and access your mortgage anytime you’d like with full transparency of the process. Plus, our team of dedicated Mortgage Advisors are here to help walk you through the mortgage process.

What you need to know about your credit score and credit checks

You may be thinking, “What does my credit score have to do with getting a mortgage?” Your credit score is actually quite an important factor to consider when applying for a mortgage.

A credit score is a 3-digit ranking between 300-900 that is calculated by the credit bureaus. It’s used to determine how likely you are to pay back credit (or in this case, your mortgage). Your credit score is made up of 6 different factors:

• Payment history – how good you are at paying your bills on time
• Credit utilization – how much of your available credit you’re using
• Age of credit history – the age of your oldest account
• Credit inquiries – a hard credit inquiry is when a bank or lender makes an inquiry about your credit to determine your creditworthiness, and it can slightly negatively impact your score. A soft credit, on the other hand, is when you check your credit score yourself
• Number of accounts – the number of credit accounts in your name
• Public records/derogatory marks – these can seriously impact your credit score

How do I improve my credit score?

It’s important to get your credit score in tip-top shape when applying for new credit, such as a mortgage approval. Out of the factors listed above, payment history and credit utilization carry the most weight in making up your credit score. So, if you’re looking to improve your credit score before applying for a mortgage, here are two easy tips to help.

Keep an eye on your credit utilization

Your credit utilization is the amount of credit you’ve used out of the total amount available to you. The lower your credit utilization, the more attractive you are to mortgage lenders. You can calculate your total credit utilization by adding up your credit cards and lines of credit and dividing them by your total credit limit.

Try to keep your credit utilization ratio below 30%. This means if you have a credit card with a limit of $3,000, then you should try to keep the balance below $1,000.

Set reminders to pay your bills on time

Paying your bills on time is one of the best actions you can take to improve your credit score. In fact, your payment history makes up 35% of your overall credit score, which makes it the most important of all the factors. Mortgage lenders like to see that you’re financially responsible and that you can pay your bills on time.

You can set a monthly reminder in your phone to ensure you pay your bills when they are due. Or, if you like to keep things simple, you can mark it on your kitchen calendar.

We’re here to help, every step of the way

When deciding if it’s the right time to get a mortgage, it’s important to weigh your options and make an informed decision that suits you and your family. Luckily, a better and easier way to get a mortgage online is finally here. When you choose QuestMortgage, we’re here to help every step of the way.

Learn more about QuestMortgage.

The information in this blog is for information purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade Group of Companies, its affiliates or any other person to its accuracy.