The Ultimate Guide To Qualifying For A Mortgage
Mar 20, 2019 • 5 min read
Are you thinking of buying a home in 2019? Then you’ve come to the right place. In this article, we’re going to be looking at qualifying for a mortgage in 2019.
Qualifying for a mortgage in 2019 is a lot like 2018. Not much has changed. While it’s true that the prime rate is higher than it was in 2018, the Bank of Canada has taken a pause of rising interest rates for the time being. This makes variable rate mortgages once again an attractive option for anyone in the market for a property.
Fixed rate mortgages remain attractive as well. We’ve seen the rates on 5-year fixed mortgages fall in recent weeks. Expect that trend to continue, especially with the spring housing market upon us. Lenders are likely to be more aggressive in their pricing on mortgages in an effort to win market share.
In 2018, the mortgage stress test was the talk of the town. While the stress test remains in effect for 2019, there’s been some talk of adjusting it since it appears to be slowing down the market more than anticipated. Now I wouldn’t hold my breath on this, but with a federal election on the horizon, anything is possible.
With each political party looking to woo voters, I wouldn’t be surprised to see the 30-year amortization make its return for first-time homebuyers. A 30-year amortization would make it easier for mortgage qualification purposes. Instead of qualifying based on mortgage payments calculated over 25 years, you’d be able to qualify based on lower mortgage payments over 30 years. This lets to qualify to borrow a higher mortgage amount.
Again, it’s important to reiterate that nothing is set in stone. We’re just in the talking stages right now. Nevertheless, it will be interesting to see what each party offers to do to help make it easier for first-time homebuyers to get into the market.
Counteracting the mortgage stress test
Have you been pre-approved for a mortgage, but you’re not happy with how much you qualify for? This is most likely as a result of the mortgage stress test. Here are some ways to counteract it.
Buying with family and friends
Buying a home on your own can be tough, especially in pricy real estate markets like Toronto and Vancouver. That’s why it helps to have two incomes on a mortgage application instead of only one. With two incomes (and two down payments), depending on the other person’s finances, your buying power could double.
Buying a property doesn’t have to be with a romantic partner. It could be with a sister or brother, aunt or uncle. If you don’t know any family members ready to buy, why not consider buying with a friend? Just be sure it’s someone you can trust since you’ll both be equally responsible for making the mortgage payments. Be sure to have an exit strategy once someone wants to sell. The last thing you’d want is a disagreement over the property to ruin your friendship.
Get a co-signer
If buying with family or friends is off the table, you might consider getting a co-signer. A co-signer can help you qualify for a mortgage you otherwise wouldn’t qualify for on your own. If your parents are willing to co-sign, depending on how much they earn, it can give your mortgage qualification amount a much-needed boost. Just be sure to understand what everyone is signing up for, as your parents will be on the hook if you aren’t able to pay your mortgage for whatever reason.
Buy a condo or townhouse instead of a house
If you can’t beat ‘em, join ‘em. If those options are off the table and you’re determined to own property no matter what, then you’ll need to adjust your home-buying expectations. You might not be able to afford a house right now, but maybe you can afford a condo or townhouse. By buying something you can afford now, you’ll get into the real estate market sooner and start building up equity to eventually move to your dream home.
Applying for a mortgage
Applying for a mortgage also remains the same. This is the fun part – where you get to shop around for a mortgage broker or online lender and *hopefully* get pre-approval for a mortgage. This is the stage where you can compare rates and offerings, such as cash-back options and different fee coverage.
Once you’ve made your decision, contact your broker or lender. You’ll also need some of the following items to go with your application: your credit report, proof of income, and a copy of your passport. Don’t forget: Borrowell offers free credit scores and reports – so your application just got that much easier.
The Bottom Line
Your credit score carries a lot of importance when lenders and brokers are taking your information and calculating your interest rate. It’s advised to get your financial house in order and work to get that credit score up before applying for a mortgage. If you’re thinking of applying for a mortgage in the future, check out the new Borrowell Mortgage Coach to find the best mortgage for you based on your unique credit profile!
Written by Sean Cooper
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedIn, Twitter, Facebook and Instagram.
Author & Mortgage Professional
Sean Cooper is the bestselling author of the book, Burn Your Mortgage. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense.