There’s a common myth that qualifying for a mortgage becomes impossible once you reach a certain age. Imagine thinking you can’t ride a bike after a certain age just because it’s “expected”. It sounds odd when you put it that way, right? The same logic applies to mortgages. While age might feel like a barrier, it cannot legally stop you from getting a loan.

Lenders cannot decline your mortgage application based on age alone as long as you are a legal adult (18 years or older). If you are 21, 60, or even 99, age still has no bearing on whether you can be approved for a mortgage.

However, that doesn’t mean you are automatically guaranteed a loan. Mortgage lenders need assurance that you can afford the mortgage payments and are unlikely to default. Factors such as your credit score, income, and debt-to-income (DTI) ratio are reviewed to assess eligibility.

This blog explains how these key factors are evaluated to determine whether you are financially stable enough to take on a mortgage, alongside how a mortgage broker can give you a much-needed edge during pre- and post-application.

1. Debt-to-income (DTI) ratios

Your DTI is a financial measure that lenders use to assess your ability to manage monthly payments and repay loans. It is calculated by dividing your total monthly debt obligations by your gross monthly income.

This number helps lenders evaluate how much of your income is already committed to paying off debts and how much room you have left to take on a new one, like a mortgage.

There are two types of DTI:

  • Front-end DTI: This ratio compares your monthly housing expenses (such as mortgage, property taxes, and insurance) to your gross monthly income.
  • Back-end DTI: This ratio includes all your monthly debt payments (like housing costs, loans, credit cards, etc.) against your gross income. It gives lenders a more detailed view of your overall debt load and financial stability.

What is a good DTI ratio?

  • A lower DTI is generally favourable because it indicates you have more income available to cover a new mortgage. Lenders prefer borrowers with a DTI of 36% or less, though this can vary depending on the lender (private, banks, etc.) and mortgage type.
  • A higher DTI suggests that a large portion of your income is already tied up in debt, making it riskier for lenders to approve a new loan.

The Importance of Managing Debts Before Applying for a Mortgage

Before applying for a mortgage, it’s essential to manage your debt levels. Lowering your DTI can improve your chances of securing approval, as lenders will see you as financially responsible.

Even better, you could qualify for the best mortgage rates in Toronto, which would save you money in the long run.

2. Income

Similar to DTI, your income plays an important role in determining whether you qualify for a loan. Lenders assess your income to gauge your ability to make consistent monthly payments, ensuring you can manage the financial responsibility of a mortgage. 

Income sources are usually straightforward for individuals aged 20 to 50—salary, wages, or business profits are the primary contributors. Many in this age group are building their careers, making steady wages, or managing small businesses, all of which demonstrate a reliable income stream that lenders look for when evaluating mortgage applications.

However, as individuals approach their 50s and 60s, their income sources can change. At this stage, some may have retired, thus leading them to rely on pension payments, annuities, or income generated from high-interest savings accounts or investments.

While these income sources are typically stable, lenders tend to scrutinize them more carefully. 

Pension income, for instance, may be lower than pre-retirement wages, but still provide consistent support. Likewise, income from investments, though variable, can be a sign of financial stability if managed wisely.

If you are considering the impact of mortgage rates in Toronto or seeking guidance, working with a broker can help you overcome these challenges.

The best mortgage broker in Toronto will help you present your income sources in the best possible light, ensuring that you meet lender requirements and increasing your chances of securing a favorable loan.

3. Credit score

A credit score is a numerical representation of your creditworthiness, which reflects how likely you are to repay borrowed money. This score, which ranges from 300 to 900, is calculated based on your credit history, including factors such as payment history, credit utilization, and length of credit history.

  • A higher credit score (700 and above) indicates you are a low-risk borrower.
  • A lower score (below 600) suggests that lenders may consider you riskier.

When applying for a mortgage, your credit score becomes important, as it determines approval. Lenders use it to assess your ability to repay the loan and evaluate the risk level they are taking.

A strong credit score can improve your chances of approval, while a weak score may lead to rejection or higher interest rates. 

Improving your credit score is essential for those seeking to secure favourable mortgage terms. The higher your credit score, the more likely you will qualify for lower mortgage rates in Toronto and better loan terms.

If you are unsure how your credit score impacts your mortgage application, a mortgage broker can help you understand the specifics of exact scores and guide you on improving it.