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 income
- Your net worth
- Value of the home you're buying
- Your credit rating
- The stability of your work and life situation
Calculate your net worth
Step 1 – Add up the value of any assets you own. Your assets include cash, investments, your home and other real estate.
Step 2 – Subtract what you owe (your liabilities). This includes any loans or mortgages you already hold.
The lender can take ownership of your home if you can’t make your mortgage payments. It 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.
Check your credit rating
Your credit report shows your record for:
- paying bills and credit cards, and
- paying back loans on time.
Learn more now about how to get a copy of your credit report.
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.