Qualifying for a mortgage

Applying for a mortgage is a straight-forward process. When you are prepared, it is unlikely you will receive any surprises. A mortgage lender needs information about your work history, debts and assets to establish your credit worthiness and ability for repayment. The bank will establish your gross income and potential payments and property tax expenses to arrive at a Gross Debt Service ratio (GDS). This is usually limited to 30-35% of your gross income. Debts will be added to establish a Total Debt Service ratio (TDS), which can't exceed more than 40 percent of your gross earnings.

The lender needs to satisfy two risk requirements:

  1. Can you make your scheduled monthly payments?
  2. Second, if you default (don't make your payments) can the proceeds of the sale of the home cover the cost of the loan?

To answer these questions, a lender will ask about your net worth. This is the difference between the value of everything you own and your debts. They will consider your bank balance, investments, real estate holdings, vehicles, debts, and credit card balances, along with your employment history.

The lender will also review your credit history. This shows your ability to repay your mortgage, as it indicates how you have handled past debts or become insolvent (bankrupt).

You will be asked to sign a form giving the financial institution permission to obtain information from your employer, creditors and credit rating agencies. You may want to check your credit history yourself, before you apply for a mortgage. This way, any problems can be corrected and you won’t be turned down for a mortgage. You can request your credit history by contacting Trans Union or Equifax, two of the major credit bureaus. You will need to make a written request for your history. Send a letter asking for your credit history, along with photocopies of two pieces of ID with your current address, plus a photocopy of a utility bill or credit card invoice. The process takes about two weeks and you'll get a good idea of how you will be evaluated by the banks.

Resolve any outstanding debt issues and ensure that any errors are corrected.

Mortgage loan insurance
If your down payment is less than 25% of the home, it is legally required that you purchase mortgage loan insurance. In Canada, most lenders are legally required to insure a high risk mortgages. If you default on your payments, the lender receives their money from Canadian Mortgage and Housing Corporation (CMHC) or other insurer. With this federal government guarantee, most lenders are confident in financing up to 90% of your purchase.

Fees for this insurance run between 0.5% and 2.75%, and are based on the size of the loan and value of your home. Premiums can be paid as a lump sum when you make your purchase or as part of your monthly mortgage payments. Additional fees include application and appraisal fees.

If you'd like to arrange a viewing of any listings you see on this site, or learn more about your options in the Calgary Real Estate market, the Kernick Home Team is ready to help with your search. Please contact us by email or call/text 403-875-7629 for assistance.

Latest Testimonials
  • Great Value and Service!

    When our 21 yr. old. son Jonathan moved to Calgary from Ontario, he decided he was going to stay for an extended...

    John and Joanna Mataya, Welland, Ontario Nov 15, 2013
  • Dedicated

    This was my second time working with Kelly. His dedication and experience made the process easier during a difficult...

    Tom Jones Jul 26, 2013
  • Found on Google

    When I planned on moving to Calgary from Fort McMurray I had no idea where to start. I didn't know people here in...

    Caroline Christopherson Apr 14, 2013
  • From Quebec to Calgary

    My wife and I had just arrived from out of province and were looking for a little place for us and our two kids and...

    Richard & Melanie Boutin Mar 25, 2013
  • First Time Condo Buyers

    My husband and I were looking to purchase our first home, and Kelly came highly recommended. Kelly went above and...

    Cody & Mandee Bird Mar 25, 2013
  • Would Refer to Anyone

    I would refer Kelly as a Realtor to anyone who asked based on my past experiences. He helped me shop around and find...

    Dana Johnston Mar 21, 2013
  • Organized and Dedicated

    Kelly is a VERY organized Realtor who works hard for everyone. I have seen first hand his dedication to helping...

    John Mayberry Aug 20, 2012
  • Kelly Found My Perfect House

    Kelly found my perfect house and was a joy to work with - what else could you ask for in a real estate professional!...

    Jane Shupe Aug 20, 2012
  • Helpful & Pleasant to Work With

    Kelly was very helpful, full of knowledge, very pleasant to work with, and was always ready to answer any...

    Angela Cartwright Aug 20, 2012
  • Always There to Answer My Questions

    It was awesome that Kelly did stuff at my fast pace. He was always there to answer my questions and if he didn't have...

    Amy Tran Aug 20, 2012
Urban Real Estate Services
820, 26th Street NE , Calgary, Alberta, T2A 2M4
Tel: 403-875-7629
MLS®, REALTOR®, and the associated logos are trademarks of The Canadian Real Estate Association.

The data included on this website is deemed to be reliable, but is not guaranteed to be accurate by the Calgary Real Estate Board. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.