Securing a low mortgage rate can potentially save you thousands of dollars over the life of your mortgage.
However, qualifying for the lowest rates requires careful consideration of several factors, which we will discuss in this article. Keeping these six eligibility factors in mind’ll increase your chances of obtaining a low mortgage rate in Toronto.
1. Credit score
Your credit score plays a crucial role in determining the interest rate lenders will offer you. A higher credit score, which is indicative of smart financial practices, typically translates into lower mortgage rates.
To ensure a good credit score, always pay your bills on time, keep your credit card balances low, and avoid applying for new credit before applying for a mortgage.
2. Debt-to-income ratio
This debt-to-income ratio compares your monthly debt payments to your gross monthly income.
Aim to keep your debt-to-income ratio below 43% to improve your chances of obtaining the lowest possible mortgage rates in the Toronto area.
3. Down payment
The size of your down payment can significantly impact the mortgage rates available to you.
Generally, a larger down payment reduces the perceived risk lenders, thus resulting in lower interest rates.
You should plan to save at least 20% of the purchase price to increase your chances of qualifying for the best interest rates.
4. Employment history
Having a steady job is attractive to lenders. They like to see that you’ve been working for at least two years in the same field/industry or with the same employer.
When lenders see a lot of job changes or breaks in your employment history, it can make them more conservative with their offers. This can translate into higher mortgage rates or, in some cases, denying their services altogether.
The opposite often happens when you can show job stability, with lenders tending to offer lower rates.
5. Financial reserves
Simply put, you need to have some money saved up. Lenders may require proof of financial reserves, such as savings or investments, to cover several month’s worth of mortgage payments.
Having this financial safety net can lead to them offering you lower mortgage rates.
6. Type of mortgage
There are many different mortgage types, each with their own rates and rules.
Conventional mortgages tend to have lower rates. These are typically given to those with top-notch credit scores and that can provide big down payments. On the other hand, government-insured loans are often more flexible but may come with additional costs.
Choosing the best kind for you and knowing which types you qualify for are important parts of securing the best mortgage rate.
Secure Low Mortgage Rates With Northwood Mortgage
Getting the lowest mortgage rates in Toronto requires you to understand what factors affect your ability to qualify in the first place.
Keep a solid credit score, control your debt, save up a down payment, show work stability, and manage your money well. All these different aspects will improve your odds of getting the best mortgage rate.
At Northwood Mortgage, we would love to help you demystify the home buying process. Contact us today for more information or to schedule a consultation. Our experienced team is ready and waiting to take your call.
