When you have found your
mortgage broker, they will ask you several questions in order to understand your needs and then find the best mortgage to meet these needs.
There are 5 credit characteristics that your mortgage broker will investigate. These are:
1. Character: This is defined by the general impression that you make as a potential borrower. It is a mixture of your credit history, your salary over the past 3 – 5 years and your general net worth. Your
mortgage broker will also examine your job stability and your expectations of obtaining a salary rise in the near future. Your total net worth is calculated using this information along with your age. Your broker might also look at your educational background, your business experience and the quality of any references you are able to obtain. Your broker is trying to obtain an idea of your general credit worthiness and your ability to repay any loan you are seeking.
2. Capacity: This is the most critical of the five credit factors. During this investigation your
Toronto mortgage broker will identify exactly how you intend to repay your new mortgage. They will look at past payment histories as an indicator of your future payment performance. They will look at your existing income and debts as well as your budget for day-to-day living. There is a mathematical equation that is often used called GDSR (gross debt service ratio) which looks at your ability to service the loan.
3. Collateral: Your
Toronto mortgage broker will look at the property that is going to being mortgaged to check its suitability to be used as collateral for the mortgage loan. They are looking at the marketability of the property should you default on the loan and they need to sell the property in a hurry. They will look at the type and condition of the property as well as where it is built, its age and any zoning problems there may be. If you have a high percentage of mortgage loan compared with the value of the property they may ask for further collateral or a mortgage insurance policy to be taken out to guarantee payment of any shortfall should you default on your mortgage payments.
4. Capital: In the current financial environment, mortgage companies are seeking very high deposits to be made on the purchase of a property so that the owner has a high equity stake in the property. Most mortgage companies require the capital or deposit to come from the person’s own resources so that they have a personal stake in keeping the property in good condition and repaying the mortgage loan promptly.
5. Conditions: Your mortgage underwriter will also look at the conditions surrounding the loan, the mortgagee and the property to be mortgaged. This might include such factors as the economic climate, the purpose of the loan, the stability of the person’s employment and any other significant financial obligations such as alimony that may be present.
Once your
Toronto or Mississauga mortgage broker has been able to ascertain these 5 C’s of credit then they are able to hunt for an optimum mortgage for you that meets all of your financial needs.