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As a homebuyer pursuing a mortgage from prospective lenders, how do the professionals determine what you are pre-approved for?

You Need a Pre-Approval

When it comes to affording and purchasing a home, individuals require a pre-approval from a bank or other credible financial institution. Lenders determine how much they deem you can reasonably pay based on a number of factors. While it may be mysterious to some, the general principles of income and assets play an important and obvious role. So how do the calculations actually work?

The Mortgage Paperwork

Someone applying for a mortgage pre-approval must provide a range of documents, including paystubs and T4s, employment and financial account information, proof of assets and liabilities, and from where you can take money for your down payment. A financial institution or other lender will also research your credit score. Once approved, experts recommend for prospective buyers to purchase a home below the maximum amount with which they are presented.

Lenders are Risk Averse

The figures you receive during and after a pre-approval meeting consider various parts of your financial past and present. In addition to your income and assets, lenders take into account your current debts and credit, not to mention the costs you will be paying for and at your new home. That includes the purchase itself, but also heating costs, condo fees (if applicable), and property tax.

Make Yourself Attractive to Lenders

Essentially, the more you earn and the better your credit, the more stable of a position your lenders will perceive you to be. The fewer debts and liabilities you have, the better. Everything is taken into account for such a significant purchase like a home. In Toronto, the average detached property is valued at over one million dollars, after all.

If you are wondering how you may be able to boost your rate, simply maintain your good financial health and avoid frivolous spending. Find a better paying job, pay your credit cards on time, pay off your student loans, and ensure a spouse or partner you will be purchasing the home with has a solid financial reputation, as well.

While the housing market has fluctuated in the past year, the condo market seems to grow steadily stronger. Real estate across the city is valuable, but mostly condominium owners have reaped the largest benefits. As demand increases, so does the supply. So how can people still charge so much for what is often so little space?

Relative affordability

When it comes down to it, condo units are often still more affordable options than homes and theoretically require less upkeep than homes. Many people appreciate not having to make their own decisions or worry independently when it comes to replacing or repairing certain aspects, such as a roof or windows. Condo unit owners are also not responsible for regular, simple maintenance such as mowing a lawn or shoveling snow.

Easier maintenance

Maintenance fees are a monthly payment required in a condo, but they vary from building to building and tend to rise only gradually. Further, they are meant to cover the cost of such repairs and replacements that tend to naturally occur in a home over time. Rather than it being the sole responsibility of the owner of a house, however, in this case, it is a shared responsibility of all condominium unit owners.

Security and community

There is arguably an increased sense of security living in a condo compared to a home, with cameras and possibly concierge in place to monitor any suspicious activity. This fosters an added familiarity and trust among residents who live in the building.

Units also closely neighbour other units to incite a sense of community, with residents sharing a variety of possible built-in amenities, such as an exercise room, swimming pool, games room, and theatre space. It is also helpful to have commercial businesses typically within walking distance or even right below a condominium.

Amenities vs. Square Footage

While houses offer greater autonomy, there is no question that condominiums offer a greater ease to homeownership. While incurring fewer responsibilities to maintain one’s property, residents can also take advantage of more security and social opportunities. Even though square footage may be an issue, having common use spaces arguably extends one’s feeling of home.