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How To Better Qualify For A Mortgage

Sept. 23, 2013
4 mins
A man signs paperwork while a woman embraces his arm

Recently my partner and I spoke with a local mortgage agent to see if we qualify for a mortgage. Since we’re both newly self-employed and carry some debt, we knew it was iffy, but we wanted to know where we stood. Most importantly, we wanted to know what we could do to make ourselves more desirable candidates in the coming year. Here’s what we learned.

The Deets On Our Debt Load

My partner and I sat down with Rob Campbell of Verico, the Mortgage Wellness Group, Inc., and he walked us through the process. First things first, he asked about our debt load. Together, we have a car loan and a student loan. The car loan, we learned, is considered “bad debt,” while the student loan is considered “good debt” (if there can be such a thing). I guess the thinking is that “bad debt” sets you back financially, while “good debt” helps to move you forward.

Asking Hard Questions About Our Income

Next, Rob had a look at our income and our savings. Both my partner and I are self-employed, so when it comes to regular income, our case is a bit trickier. Essentially, we’ll just have to jump through a few more hoops than another couple might have to. Finally, Rob took a look at our credit scores. They weren’t bad, but they could definitely stand some improvement. We had enough active trade lines, as in, we could show a history of debt repayment (most lenders require at least two active trade lines that have been active for more than one year).

It's Not Just What You Owe... But How You Owe It

In order to qualify for a mortgage, lenders will look at your debt to income ratio (DTI). Debtsinclude credit card debt and any loans you may have, including student loans, car loans and personal loans. Your income is what you earn on a monthly basis. If your income fluctuates from month to month, your mortgage agent will consider your income for the past two years and take a one-month average. Next, he or she will divide your total monthly debt obligations by your total monthly income. In order to qualify for a mortgage, you’ll want this number to fall somewhere between 28% and 44%. Some lenders will allow borrowers to have a debt to income ratio higher than that, but is that really something you want? Probably not.

How To Make Yourself A Better Candidate For A Mortgage

My partner and I walked away knowing that we had some work to do. First of all, in order to improve our credit scores, we’d have to make sure all of our bills were paid on time – every single month. In the past, we’ve let them slide from time to time. We didn’t know it, but doing so has affected our credit scores.

Next, we need to lower our debt. We both have credit cards that need paying down, and that car loan has got to go. There’s not much you can do about a student loan, but since it’s not considered “bad debt,” it’s not really a problem. Finally, if possible, we have to work to increase our income (I know, I know – isn’t that what we all want?). We both know that we could pull up our socks and get serious about saving, which we haven’t done in the past. Part of the plan is also to set aside money each week – automatically – so we don’t even notice it leaving our accounts.

Test Drive Your Mortgage Pro

In the end, although the answer wasn’t what we wanted, my partner and I are glad we explored our options. Visiting him in person allowed us to “test drive” our mortgage agent, so to speak, to make sure that he was a good fit for us. Personally, I think it’s important that you feel comfortable with the person you’re going to be working with. Plus, Rob says that it’s a good idea to run a few “rough numbers,” so you know what you have to do to prepare ahead of time. He was able to walk us through the process, so we know what to expect in the near future – and what we need to work on. It feels good to be on the right track. Before long, we’ll have a home to call our own, and we’ll be comfortable paying for it when it the time comes.


The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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