Why lenders may refuse your mortgage application
I always suggest my clients talk to a mortgage broker or their bank before starting to look for a home. Do not rely on mortgage calculators on websites to pre-qualify you.
There are many reasons why your favourite bank or lender may reject your clients when they apply for a mortgage. Here are some of them.
Not enough credit history:
If you are new to the country or you recently finished at college/university or you don’t own any credit cards, lenders likely will not give you a mortgage because of the lack of credit history. Lenders want to know your paying habits.
Low or bad credit score:
If your Equifax credit score is bad or too low, banks and lenders may not lend you any money. Bad credit ratings result from missed payments in the past, bankruptcy and deferred payments. It is possible A lenders will refuse you and B lenders will charge a very high interest rate.
Recently started new job:
If you recently started a new job, chances are banks and even B lenders will wait at least until your probation period is over. Sometimes this can be six months or more. If you have a stable job and have been working at your current job for some time, lenders will look at you as a good candidate for a mortgage.
Too much loan debt:
Even if you have a stable job and you have worked at your current job for many years, if you already have too many loans or too much debt (high car payments, credit card debt, student loans), chances are you may be refused for your mortgage.
Not enough for a down payment:
These days it is hard to find detached homes in Greater Victoria for less than $600,000, making it tough for young people to come up with a large enough down payment.
Self employed income:
If you are self employed or you fall under the category of self employed contractor, banks and lenders will request the last two years of your income tax notice of assessments.
Too many properties:
Everything is fine if you have good stable job, you have enough money for a down payment and your credit score is fine. But it is possible the bank you deal with will refuse another mortgage because you now have too many properties. All banks have limits of how many mortgages they can grant to the same person.
Unforeseen events in your life:
Life is very unpredictable. Unforeseen events such as health issues, job loss or a divorce will increase the chance that you are going to be refused for a mortgage.