Getting ready to start looking for a property? To do so, you will need a mortgage pre-approval. Although this is the maximum amount you could get, it does not guarantee that you will obtain a proper mortgage loan.

When a lender decides to pre-approve you and determines the amount you qualify for, they measure a number of factors that relate directly to the documents you have provided. The more accurate information you are able to provide, the better your chances of getting pre-approved. At Mortgage Planners, we can also analyze your situation and provide you with a mortgage pre-approval, just like a lender.

In this article, we outline the key factors in getting approved for a mortgage.

Documents related to your identity

This requirement makes sense, as identity verification is an essential step in the pre-authorisation process. That said, identity theft is a major and growing problem. For this reason, your lender will require government-issued identification. Usually, a driver's licence or a passport showing your name, address and date of birth will do the trick.

Proof of employment

To ensure that you can make your monthly mortgage payments, your lender will want to confirm that you have a steady job. You will need to provide a letter from your employer stating the nature of your job and the length of your employment. Are you self-employed? Then you will need to provide your lender with your notices of assessment for the past two years, as well as additional information such as the nature of the business, balance sheets, results of operations and references, among others.

Proof that your income is stable

You will also need to provide tax records or pay stubs to confirm that your income has been stable for at least two years. If you have been out of work for a long time or have experienced instability, your lender will probably be less likely to give you a mortgage. If you are self-employed, they may require a recent notice of tax assessment and other evidence that demonstrates your ability to generate sufficient income. Other evidence that your lender may ask for is salary from a second job, commissions, bonuses or investment interest.

Proof that you hold eligible assets

Assets are all possessions that have financial value and can be easily liquidated. Money in your savings or chequing accounts, investments, property, vehicles (cars, boats, etc.) and valuables (jewellery, artwork, etc.) are considered assets. Your lender will then ask you for information on all your assets and their respective values in order to determine the total value. The lender needs to be reassured that in the event of financial difficulties you will have access to funds to continue your payments.

The importance of your credit rating

Your credit rating plays a crucial role in whether or not you are approved for a mortgage. Based on your credit history, this information is found in your credit report. If your credit score is insufficient (below 650), it will be difficult to obtain a conventional mortgage. It is also recommended that you check your credit report regularly to ensure that it does not contain inaccurate information.

If you seriously consider all the factors listed above before applying for a mortgage pre-approval, your chances of getting one will be greatly improved. The home ownership you've been dreaming of could become a reality!