Recently on Radio 104.7 Outaouais, Patrick Dumond, a mortgage broker with Multi-Prêts, shared essential advice for anyone looking to optimize their mortgage application. He explained how to properly prepare your file, paying particular attention to your credit score, to convince lenders and increase your chances of approval. Here are the four key factors banks review when evaluating a loan application.
1 – Ability to Meet Obligations
The bank starts by assessing your ability to meet future financial obligations. This isn’t just about your current income, but also your capacity to manage existing and upcoming debts without default risk. Each institution applies its own criteria, which can make the process seem intimidating.
2 – Capital and Resources
Lenders want to ensure you have sufficient net worth to cover unexpected events. This includes your down payment, savings, and ability to build equity over time. The bank also checks whether you have access to additional financial resources in case of difficulties, which can make a difference during the evaluation.
3 – Credit History
A strong credit history is crucial for approval and favorable terms. Lenders typically review reports from the two main credit bureaus, Equifax and TransUnion. These agencies collect and analyze information about your financial history, including on-time or late payments, debt levels, credit mix, and the length of your credit history.
A score of at least 680 is often expected to demonstrate stable management, but higher scores, up to 900, can secure better terms. For example, a score above 760 is generally considered very good, while anything over 830 is deemed exceptional.
Having a good credit history also opens access to a wider range of mortgage products. Additionally, some lenders offer extra discounts or exclusive promotions to their best clients.
4 – Collateral
The type of property plays a role in how the bank evaluates risk. A standard urban property is usually easier to finance than an atypical, rural, or heavily renovated property. Banks consider the property’s value, resale potential in case of difficulty, and any unique factors that could affect risk assessment.
Maximize Your Chances of Approval
Negotiating directly with a bank can be difficult and intimidating, as each institution applies its own risk evaluation criteria. A mortgage broker reviews your file as a whole and highlights your strengths to lenders, especially when your situation has special circumstances. It’s not uncommon for a previously declined application to be successfully resubmitted thanks to a broker’s expertise and understanding of lender expectations. A mortgage broker knows these nuances and can guide clients to the institutions best suited to their profile, maximizing the likelihood of approval.