3 top reasons a lender rejects a mortgage application 

Just because you have a good income doesn't mean you'd qualify for a mortgage.

There are several different items that could cause a mortgage lender to deny an application.

That's why I say, "your first step to buying a home is getting pre-approved".

Without a pre-approval or all cash to buy, it's pointless to start viewing homes.

Let's take a look at the top 3:

 1. Debt-to-income ratio is out of whack

In Canada, the lenders want to ensure you're not house poor. So they use two different calculations. 

Gross debt service ratio (GDS) and total debt service ratio (TDS)

GDS is the percentage of your monthly household income that covers your housing costs. It must not exceed 39% of your annual income.

TDS is the percentage of your monthly household income that covers your housing costs and any other debts. It must not exceed 44% of your annual income.

Ie. A mortgage lender may say they'll approve your mortgage if you can pay down $5000 of your credit card debt. They do this to bring your TDS percentage down into the approved lending criteria.

2. Low credit score 

If you're the average buyer, who's saved 5% for a down payment but your credit score is under 650, it could be tough getting a mortgage.

I've seen people with lower credit scores that have a 20% down payment get a mortgage. In this case money talks!

It's best to monitor your credit score and ensure you are making your payments on time. 

This will help keep your credit score in good standing. 

3. Unable to verify income

If you just started your job or a new business this could cause an issue.

Usually, your lender will want to see two years of Notice of Assessments proving income. 

They'll also ask for job letters (if you're an employee) and other proof such as bank statements.

Ultimately, if you want to buy a home, consulting a mortgage broker is your best option.

 DM me if you have any questions or would like to connect with my team to see if you qualify.