Has your mortgage loan been denied? You are not alone. This happens all the time because of several reasons, and it doesn’t mean you cannot own a home. One of the common causes is low appraisal. Usually, if a lender notices that a property’s appraisal is significantly lower than the purchase price, they are likely to decline your application. This is because the loan-to-value ratio may be higher than they can approve.
When you provide your financial information to a lending institution, you will understand how much money you need as a down payment and for closing. These cannot be added to your loan. Therefore, if you cannot the amount indicated, then the chances of getting a loan will be low. Fortunately, you can take the following measures to get favourable deals on a second mortgage Ontario:
1. Understand Your Credit score
In Canada, credit scores run from 300 to 900 and are classified as poor, fair, good, very good, and excellent. The classifications vary from one credit bureau to another. Your lender will use the scores to determine your financial trustworthiness and ability to repay the loan.
If you have high credit scores, you are likely to get a loan at a favourable rate. Generally, you should ensure your credit scores are at least 660. If the credit scores are too low, focus on improving them.
2. Show Proof of Income
A lender would want to review your financial information before deciding whether or not to offer a loan. Usually, you will be required to provide recent payslips, which will show whether you have a stable income. If you receive other forms of income, you need to provide proof for verification.
3. Pay Down Your Existing debt
A mortgage is long-term debt. Therefore, you need to minimize your existing debt. Repaying a loan will be much easier if you don’t have other debts. If you have existing debt, the chances of denial are high. Before approval, lenders will consider your debt-to-income ratio. Your balances don’t necessarily have to be zero, but they will affect the amount you can get.
4. Shop Around
Many people, especially first time home buyers, prefer going to their local financial institution for loans. However, they may not have the right loan for your financial needs. Lenders offer a variety of loans at different rates. Consider consulting a mortgage broker and ask them to compare a variety of options from different lenders.
5. Save More Money
The requirements for getting loans to change from time to time. When you apply for a loan, you will be required to give some cash. Having zero cash lowers the chances of approval. The down payment requirements vary from one lender to another. Higher down payments may lead to lower costs of owning a home.
6. Stick to Your Job
According to experts, staying in your current job throughout the process of buying a home is crucial. Moving to a new employer will affect your income status and may delay the process.
Finally, now you know the possible reasons why your loan application may be declined. Fortunately, you can still take some measures and use the above tips to get good deals.