How to Shop for a Mortgage in Toronto without Ruining Your Credit

The biggest mistakes that individuals make when shopping for a mortgage are over shopping and under planning. Here are some tips on how to shop for a mortgage in Toronto, without ruining your credit.

Before you start looking for a mortgage, you should first think about if you qualify for a mortgage. This starts with requesting your credit report from Equifax. Your credit score is important because if it is less than 680, your mortgage options will be greatly reduced.

If you want to shop for a mortgage and have less than a 25% down payment, you will need CMHC mortgage insurance to qualify for a mortgage with a bank. When a mortgage is insured by CMHC, the applicant must apply with both the bank and with the CMHC. Usually the bank will submit your CMHC insurance application to them on your behalf.

Both the CMHC and the bank will require the following:

1. That your housing payments (with your new mortgage) do not exceed 32% of your gross income.

2. That your housing payments (with your new mortgage payment) and your payments to credit/debt do not exceed 42% of your gross income.

3. They will want to see good stability.

4. They will want to see proof of your income.

5. Most banks will require a minimum credit score of 680. However, the CMHC will often insure a high ratio mortgage when the applicants credit score is as low as 620.

If you do not satisfy the above basic criteria, you still have mortgage options in Ontario. Because the CMHC will insure a high ratio mortgage for someone who doesn’t meet the banks minimum criteria, there are a number of credit unions and trust companies that offer more flexible lending criteria.

The planning part of preparing to purchase a home should include reviewing your personal finances and credit to ensure you can obtain financing. There is nothing worse than falling in love with a home you want to purchase, only to learn you cannot get a large enough mortgage to make the purchase.

When the time comes to obtain a mortgage pre-approval, do not go from bank to bank applying for mortgages trying to get the best deal. Many folks don’t realize that each applicant for credit is reported to the credit report and too many applications for credit in a short period of time can actually reduce your credit score.

Your best bet is to establish a relationship with a local Mortgage Broker, one who deals with all the banks. If you are worried that you may face challenges qualifying for the mortgage that you want, when looking for a Mortgage Broker, ask them if they are capable of dealing with all types of credit and income. In most cases, the bank will pay your Mortgage Broker, so there is huge value to taking advantage of a resource that can shop the best deal for you. For more information about how to shop for a mortgage in Toronto without ruining your credit visit http://www.gtamortgagematters.com/