What Happens When You Can’t Qualify For A Mortgage!?

If your mortgage application has been declined, it’s probably due to low income, too much debt or bad credit. Here are some ideas of what you can do if you’re getting declined:

Low income: if the bank tells you that you can’t afford a particular mortgage amount because of your income, it’s for good reason; you won’t be able to afford the payments. Try the following:

■Lower your mortgage expectations by shopping for a cheaper home
■Start making more money
■Put more money down. A bigger down payment means a smaller mortgage
■Get someone to co-sign the loan with you. If you know someone who’s willing to back your loan, you can
have him or her sign with you on the mortgage as assurance to the bank that at least someone has the ability to make the payments.

Too much debt: a large chunk of what the bank believes you can afford is based on the credit that is available to you. So, for instance, if one person has a MasterCard (with a balance) with a credit limit of $5,000 versus someone with three credit cards (no balance) with credit limits totalling $15,000, the person with the MasterCard (with a balance) is considered to be less of a default risk. This is because the person with the $15,000 limit has the potential to utilize all that credit. Here’s what you should consider doing if you’ve got too much available debt:

■Slowly begin to consolidate consumer debt to reduce your overall available credit. Cancel unused credit cards (keep the one with the best and longest credit history), transfer balances and ask the lender to reduce the credit limit or both.
■Focus on paying down consumer loan balances quickly. The faster you get rid of your consumer debt, the more available income you’ll have to allocate toward a home.

Bad credit: before you enter into the application process, review your credit report. To ensure your credit file has accurate information, check on it every year. You can order your credit report online or by mail through Equifax Canada Inc. or TransUnion Canada Inc.
If there’s an error on your report, send a written request (with official receipts and paperwork supporting your side of the issue) to the credit bureau, which will investigate. If the error turns out to be incorrect, the credit bureau must correct it and send out revised reports to the lender you are trying to get a mortgage from.

If you’ve been late on payments, missed payments, not repaid a loan or have declared bankruptcy, you’re going to have a tough credit rating to face. Here’s what you can do: be responsible and wait it out. Make your payments on time, don’t miss payments and don’t ignore your debts. If you’re struggling with keeping up, see a credit counsellor who can help you negotiate new terms with your lenders.