How The Mortgage Pre
This mortgage pre-approval calculator gives you the opportunity to know in advance how much home financing you can qualify for. But please understand its a calculator only, and the official number will be determined by a mortgage lender.
In addition, the validity of the results youll get from this mortgage prequalification calculator will only be as good as the information you input. For that reason, be as accurate as you can be. If you inflate any information, like your annual income or your credit score range, you may get a higher loan amount, only to get a smaller pre-approval amount from an actual mortgage lender.
The mortgage pre-approval calculator is self-explanatory, but heres a general overview.
Why Should You Opt For A Pre
- A pre-approval letter might be the key to your home, figuratively and literally speaking. The fact is that the housing market is a tremendously competitive one that rolls along at breakneck speed. The seller might want to see a pre-approved letter from the lender, a document that endorses your seriousness and dedication towards the property and also establishes you as a valid and able potential purchaser
- You will have been well-acquainted with the process of availing a home loan by the time the opportunity materializes
- You will be able to plan your budget depending on the sanctioned pre-approved amount
- Processing and finally approving the home loan amount will be a faster process once you have it pre-approved
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Stated Income Or Stated Asset Mortgage
This type of mortgage is based on the income that you report to the lender without formal verification. Stated income loans are sometimes also called low-documentation loans because lenders will verify the sources of your income rather than the actual amount.
Self-employed people should be prepared to provide a list of their recent clients and any other sources of cash flow, such as income-producing investments. The bank may also want a copy of Internal Revenue Service Form 4506 or 8821.
Form 4506 is used to request a copy of your tax return directly from the IRS, thus preventing you from submitting falsified returns to the lender. It costs $43 per return, but you may be able to request Form 4506-T for free. Form 8821 authorizes your lender to go to an IRS office and examine the forms you designate for the years you specify, free of charge.
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Are There Drawbacks To A Pre
There aren’t any great drawbacks to obtaining a single pre-approval, but having several in a short period can potentially harm your ability to borrow.
Pre-approvals will be visible on your credit file as a loan enquiry, and having many in quick succession and with multiple lenders might create the impression that you’re financially unstable.
While this shouldn’t discourage you from seeking pre-approval, it does mean it’s a good idea to wait until you’re seriously considering a purchase, rather than applying early in the process when you might just be entertaining the idea.
If youre not quite ready to apply, you can get an idea of how much you may be able to borrow using the Suncorp Bank Borrowing Limit Home Loan Calculator.
Why Apply For A Mortgage Pre
A mortgage pre-approval is an important part of the home buying process. If you are pre-approved, it means that a lender has stated that you qualify for a mortgage loan based on the information you have provided, and subject to certain conditions. A mortgage pre-approval often specifies a term, interest rate and principal amount. Although not a required step, it is helpful as it can give you a clearer picture of how much house you may be able to afford.
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What Can I Afford
Thank you for taking the time to complete our calculator. Based on the information your entered, your results are illustrated in the table below.
For more information, visit us at www.scotiabank.com/mortgage to locate your nearest branch or Home Financing Advisor.
|You can afford a home with:|
|A maximum purchase price of: 256,192.54|
|A minimum down payment of: 250,075.56|
|A monthly payment of:1,600.00|
|A total mortgage amount of: 12,810.00|
|Includes mortgage default insurance premium of $6,693.02|
For the purposes of this tool, the default insurance premium figure is based on a premium rate of 4.0% of the mortgage amount, which is the rate applicable to a loan-to-value ratio of 90.01% 95.00%. However, the insurance rate for your scenario may be higher or lower than this, which would normally result in a higher or lower insurance premium, respectively. Current premium rates may be found at https://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm.
A maximum purchase price that is over $1,000,000 will use 20% minimum down payment for illustrative purposes, however a higher percentage may be required by your lender. Speak to your lender for exact amount.
Get Preapproved As Early As Possible
If you are starting your homebuying process, a mortgage preapproval letter says how much that lender is willing to lend to you. In other words, you will know how much house you can afford, making your house hunting process easier for you and your real estate agent.
Bear in mind that the letter may have an expiration date .
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How To Use The Pre
Our pre-qualification calculator can provide an idea of what to expect before you talk to a lender. All we need are a few pieces of information about you and your finances:
Enter your annual income before taxes.
Enter the term of the mortgage youre considering.
Select your credit score range.
Tell us about your employment status.
Tell us if you have a down payment.
Tell us about past foreclosures or bankruptcy.
Enter your monthly recurring debt payments.
After completing each required field, youll see the loan amount we recommend, as well as a higher loan amount. We show two pre-qualification amounts because:
Different loans have different debt-to-income requirements. For example, conventional loans usually have stricter DTI requirements than FHA loans, insured by the Federal Housing Administration.
Its not always smart to borrow 100% of what a lender offers. The maximum loan amount is the most the lender is willing to loan you, not what makes sense for your budget. A higher loan amount will mean a higher monthly mortgage payment. Borrowing too much could make it difficult to ride unexpected financial bumps, such as a job loss or a big medical bill.
What To Do If You Cant Get Preapproved
If you cant get a preapproval, try to find out from the lender why you were denied. If its an issue you can remedy, like an error on your credit report thats causing the lender to reject your application, you can address that right away and seek a preapproval again when its resolved.
If you have too low of a credit score or other financial roadblocks preventing you from being preapproved, you can work to improve those areas, too. Raise your score by making payments on time and paying down your debt load, for example, or lower your debt ratio by finding a way to increase your income. Depending on your situation, this could take time, but itll go a long way.
Some lenders have very stringent qualifying criteria, so another option is to work with a different, more flexible lender. If youre an account holder with a local bank or member of a credit union, these institutions might be more willing to work with you to get you preapproved.
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Why Calculate Mortgage Affordability
When you’re looking to buy a home, it’s handy to know how much you can afford. Being able to calculate an estimate of how much you’re able to borrow is an important part of setting your budget.
You also need to determine if you have enough cash resources to purchase a home. The cash required is derived from the down payment put towards the purchase price, as well as the closing costs that must be incurred to complete the purchase. We can help you estimate these closing costs with the first tab under the mortgage affordability calculator above.
Taken together, understanding how large a mortgage you can afford to borrow and the cash requirements involved will help you determine what kind of home you should be on the look out for. To learn more about mortgage affordability, and how our calculator works, have a read of the information below.
Document Your Income And Assets
Your lender will require documentation to support the info in your loan application. This is what makes getting preapproved different from getting prequalified.
Typically, your lender will require the following documents for mortgage preapproval:
- Identifying documents such as a valid drivers license or photo ID
- Last two years W2s and/or 1099s
- Last two years tax returns
- Profit & Loss statement if selfemployed
- Pay stubs for last 30 days, if applicable
- Statements from bank accounts, retirement accounts, and other asset accounts
- Divorce decree or separation agreement, if applicable
- Contact information for your landlord for the last two years, if youre a firsttime home buyer. If you are currently a homeowner, your housing payment history will show up on your credit report
To speed up the preapproval process, it helps to have these documents in hand before you get started.
Some lenders can pull documents directly from your employer and bank, but not all. Some can also verify your income with the IRS, with your consent.
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What Is Mortgage Affordability
Mortgage affordability refers to how much youâre able to borrow, based on your current income, debt, and living expenses. Itâs essentially your purchasing power when buying a home. The higher your mortgage affordability, the more expensive a home you can afford to purchase.
The term âaffordabilityâ is also used to describe overall housing affordability, which has more to do with the cost of living in a particular city. If the cost of housing relative to the average income in a city is high, it will be seen as a less affordable place to live. The two terms are related, but itâs important to understand the difference.
There are many factors that will affect the maximum mortgage you can afford to borrowincluding the household income of the applicants purchasing the home, the personal monthly expenses of those applicants , and the expenses associated with owning a home .
Ready To Start Your Home Buying Journey
Whether you’re just thinking about buying or you’re ready to buy, you can get started online!
The Mortgage Affordability Calculator estimates a range of home prices you may be able to afford based on the accuracy and completeness of the data and information you enter. The results are intended for illustrative and general purposes only, and do not constitute, nor should they be relied upon as financial or other advice. To discuss your full range of home-buying options, please contact your branch or call
The results are calculated and generated based on the accuracy and completeness of the data and information you have entered and provide an estimate only. The results are intended for illustrative and general information purposes only, and do not constitute, nor should they be relied upon as, financial or other advice. The interest rate shown is calculated either semi-annually not in advance for fixed interest rate mortgages or monthly not in advance for variable interest rate mortgages. These rates are only available for already built, owner-occupied properties with amortization periods of 25 years or less. Any application is subject to credit approval. For more information, please contact us to discuss your home-financing options.
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What Factors Are Considered For Preapproval
In addition to considering your credit score, lenders will want to verify your employment and income. Theyll also be considering your debt-to-income ratio , which is a calculation of your total monthly debts, divided by your monthly income. This ratio, expressed as a percentage, helps lenders make sure you have enough income to reasonably cover your debts.
The exact DTI needed for mortgage approval varies by loan type. But generally speaking, youll want your debt-to-income ratio to be 50% or lower.
Can You Borrow With Your Current Income
Though you may feel that your finances are ready for a new home, the bank may not feel the same way. Mortgage lenders use a complex set of criteria to determine whether you qualify for a home loan and how much you qualify for, including your income, the price of the home, and your other debts.
The pre-qualification process can provide you with a pretty good idea of how much home lenders think you can afford given your current salary, but you can also come up with some figures on your own by learning the criteria that lenders use to evaluate you.
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Where Do You Want To Live
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How much mortgage can I afford?
The first step in searching for your home is understanding how large of a mortgage you can afford. With a few inputs, you can determine how much mortgage you may be comfortable with and the potential price range of your future home. Knowing your total household income, how much youâve saved for a down payment, and your monthly expenses , plus new expenses youâd take on , you can get a reasonable estimate. Learn more about factors that can affect your mortgage affordability.
How to estimate affordability
To estimate mortgage affordability, lenders will use two standard debt service ratios: Gross Debt Service and Total Debt Service . According to the Canadian Mortgage and Housing CorporationÂ¹Note 1:
– GDS is the percentage of your monthly household income that covers your housing costs . It should be at or under 35% of your pre-tax household income.
– TDS is the percentage of your monthly household income that covers your housing costs and any other debts . It should be at or under 42% of your pre-tax income.
How your down payment affects affordability
The amount you have saved for a down payment is also another important piece of information to help determine affordability. Depending on the purchase price of a home, there are minimum amounts required for your down paymentÂ²Note 2:
Step 2 of 6
Increase Your Down Payment
If you have the cash, you may want to up your down payment to 10 or 20 percent. A down payment raises your maximum home price, which may be enough to buy a home that you want.
If you dont have the cash, keep in mind that you can ask relatives for gift money.
You can also apply for homebuyer assistance programs from state and local government programs that provide down payment and closing cost funds. Your eligibility for these programs may vary based on your personal finances.
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Negotiate With The Seller
There is no reason you cant ask for seller contributions instead of negotiating for a lower purchase price. Depending on the type of mortgage you choose, the seller can contribute 3 to 6 percent of the home price in closing costs.
This can make all the difference when you want to buy a new home and stop renting.Seller contributions can cover closing costs, buy your interest rate down to a more affordable level, or make a onetime payment to cover your mortgage insurance.
What Does This Possibly Mean For Me
Based on your income, expenses, and the loan you selected, the amount above represents the most you will likely be comfortably able to pay for a home. This assumes that your total costs for your loan payments , taxes, and insurance should not be higher than 45% of your monthly income. Also, remember that you’ll have additional homeownership costs that you may need to factor into your monthly budget, including insurance, association fees, and maintenance expenses.Mortgage insurance expenseswhich you may have to pay if your down payment is less than 20%are not included in this calculation. We suggest that all buyers get pre-qualified or pre-approved prior to starting their new home search.
You selected an adjustable rate mortgage or ARM. Based on your income, expenses, and the loan you selected, the amount above represents the most you can comfortably afford to pay for a home*. This assumes that your total costs for your loan payments , taxes, and insurance should not be higher than 45%. Also, remember that you’ll have additional homeownership costs that you may need to factor into your monthly budget, including insurance, association fees, and maintenance expenses. Mortgage insurance expenseswhich you may have to pay if your downpayment is less than 20%are not included in this calculation. We suggest that for all buyers to get pre-qualified prior to starting their new home search.
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Is It Better To Get An Auto Loan From Your Bank Or The Dealership
If you qualify for bank financing, youre typically better off taking that option. While its convenient to get financing from the dealer, youll typically pay for that convenience.
Dealers do all the work when you get financing through them, and in return, they often inflate the interest rate the bank offers, so they make a commission on the deal.
Securing financing yourself ensures youre paying the rate youre meant to pay, and you arent paying any extra fees for the service.
How Long Does It Take To Get Pre
As long as you have all your documents ready, you should be able to get a mortgage pre-approval on the same day you visit your lender.
However, lots of debt, a history of previous foreclosures, and a low credit score can slow down the process. If any of these apply to you, the pre-approval process can be much longeranywhere from a few days to several monthsdepending on the complexity of your finances.
The only way to speed up the process is to give your lender all the documents listed above. Dont forget anything!
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