It’s time to move and you’re wondering how to get a mortgage with low income in Ontario. If you’re looking to buy a home in Ontario on a lower income, we’re here to help. Whether you have a poor credit score or don’t earn as much as you’d like to, we’ve rounded up everything you need to know about getting a mortgage on a low income.
If you’ve been having trouble getting a mortgage preapproval the traditional way, this guide has you covered. Even with a low income and less than perfect credit, we’ll help you find the best mortgage loan for you.
Get Your Application Paperwork Ready
Before start applying for a mortgage, you’ll want to get all your paperwork in order. If your income is low or you have less-than-perfect credit, there are still alternative mortgage solutions to get you mortgage financing.
To start, you’ll need your identification as well as your Social Insurance Number (SIN). High-risk mortgage lenders need this information to run your credit history and approve you for your loan. Next, you’ll need to gather your income statements.
Have a copy of your tax returns, pay stubs, and additional income ready. This information is used to verify your employment and how much money you make annually. This is also how a lender determines how much you qualify for.
It’s also helpful to have your bank account numbers handy. Your lender will take a look at your overall assets and liabilities. They will pull bank statements to see how much you have in case of an emergency.
High-risk, private mortgage lenders are a lot more lenient on debt and savings requirements. This will make qualifying for a loan a lot easier than with a traditional bank.
Create Your Budget
When you’re applying for a mortgage, it’s helpful to have your income and expenses laid out on paper or in a spreadsheet. While your lender is also looking at this information, you’ll want to do this on your own to determine what monthly mortgage payment you’re comfortable with.
Start by listing out your income. If you have more than one job, take your wages from each job. Total everything to get your average per month.
Next, you’ll start listing out each of your monthly expenses. Make a note of which expenses are fixed. Financial obligations are bills that have to be paid each month no matter what. Car payments and student loans are examples of fixed expenses.
Other expenses include fitness memberships and your average grocery spending. If you need to cut back on some expenses, this is the category you’ll have some wiggle room. Maybe your monthly visits to the salon will go towards your mortgage instead.
Start a Savings Plan
Once you have your budget laid out, you’ll have a better idea of what’s left. This will give you a better picture of how much mortgage you can afford.
With a higher-risk mortgage, you still have the flexibility to borrow enough funds to purchase or refinance your property. This is to make sure you’re in a home you can comfortably afford. In addition to the amount you’re pre-approved for, you’ll also want to have a number in mind.
Just because a lender says you’re approved for a certain amount doesn’t mean that’s what you’re comfortable with. Only you truly know what other expenses you have and how stable your work is.
Once you have your ideal budget in mind, it’s time to start a savings plan. You can save for your mortgage payments, a down payment, closing costs or to pay off debts. The more you have saved the better your loan terms will be.
Take a Look at Your Credit
Your credit plays a big role in how much of a mortgage you qualify for. You can download your credit report for free to check on your score before applying. Your lender will also run your credit to verify your score.
With bruised credit, you’ll want to use a mortgage lender who specializes in low-credit loans. Before you apply, it’s helpful to start working on improving your credit score as well. To start, go through and look at your report for anything you can dispute.
If you see anything on your report that shouldn’t be you can call the accounts to have it removed. Next, start to pay off your debts. While chipping away at larger debt is great, if you can pay off any smaller loans or credit cards this will help to boost your score.
While credit requirements are looser for those with poor credit, anything you can do to improve your score is better for your overall financial health. Less debt also frees up more money to put towards your mortgage.
Get Pre-Approved For A Home Equity Loan or Purchase
While your application is in process, you’ll likely get a pre-approval decision. Your mortgage broker will be able to communicate just how much you can qualify for and what your monthly payment obligations will look like. This can include the mortgage alone or the property taxes and mortgage payments together.
Your pre-approval is a great tool to start shopping for a new home or to decide on a final home equity loan amount. Once you have your loan amount handy, you’ll have a better idea of how much home you can afford.
House Hunting or Refinancing
After you have your pre-approval, it’s time to give this information to your realtor. Your realtor can take your loan amount and help you find a home that fits comfortably into your budget. Remember that no matter how much you’re approved for, you can always go lower to stay within your means.
Apply for Your Low-Income Mortgage Today
If you’re ready to jump into the world of Ontario homeownership or refinance your property it’s time to start your application. Even with a low income or lower credit score, we have mortgage options for you.
Contact us to today and we’ll help you get a home equity loan that works for you.