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  • Writer's pictureJosh Reyes

11 ways to improve your mortgage approval

Planning ahead to strengthen your mortgage approval is never a bad idea. Here are 11 ways to get ahead and improve your mortgage approval.

Photo by Brandon Griggs

1. Make more money

Easier said than done, am I right?

The reality is your income is the most important factor in your mortgage approval. It’s the way you can show them stability and a promise of reliability in your life and your finances.

When it comes to making more money, you have a few options:

Get an additional job: Finding a part-time job that can be done after work or on weekends is a great way to add a second income stream. This can even be a great way to get out of the house and try something new! Wait tables at that fancy new restaurant or work with some outdoor activities!

Negotiate better pay: Getting a raise is a great way to increase your cash for savings but also have a higher standard for your income going forward. It’s important to not simply ask for a raise because you are looking to buy a new home. Ask for tangible goals, keep your boss in the loop, and deliver on them. Asking for a raise afterwards is a lot more reasonable than a flat out, arbitrary request!

Freelance on the side: Got a skill set that’s hot today? See if you can use the skills you use at the office to take on some clients on the side. This is a great way to make income from your bed in your PJs. It’s a win-win: you work on projects you could do in your sleep and the clients are ecstatic because it’s a skill set they simply don’t have!

While going after a new job with a beefy salary might be tempting, try your best to find a compromise with your current employer. Jumping into a new job works against those stable and reliable factors we talked about and can actually work against you when applying. Most jobs have a set probation period which means even though your income is higher, it’s not guaranteed going forward.

2. Create a new debt repayment system

Debt is never fun, and it definitely won’t help you lock down a solid mortgage.

Start setting aside a portion of each pay cheque to go directly towards paying down your debt. Start with 10% if that’s all you can handle for now. Eventually try to get up to 30% until your debt is a distant memory.

Alternatively, consider creating a direct income stream for your debt. This means taking on another source of income (like a part-time job) where 100% of the income goes straight to debt repayment.

Lastly (and the least recommended), see if someone can help you repay the debt. If your parents are in a cash liquid position, have them lend you money to get your debts down on paper. This changes your debt on paper, but not the reality of your debt. You still owe your parents down the line so it’s your last resort and should always aim to actually pay down your debt instead.

3. Avoid big purchases

Big, shiny purchases are like giving your mortgage approval the flu.

They affect the savings you have in hand, create debt, and ultimately negatively affect your chances of getting a strong mortgage approval. Avoid new major purchases like a new car unless absolutely necessary and then still reconsider it!

Just don’t do it! You can wait, I believe in you.

4. Save harder

Duh, right?

This sounds simple but make sure you have an actual system in place. Take a percentage of each pay cheque and set it aside. But actually do it.

A “fun” exercise you can do is think about where that money you could go next time you go to spend. If you have food at home, would you rather spend $60 on Chinese food that leaves you feeling sick after or would it be better to drop that $60 into your savings bucket? Those new jeans that are just a shade different from your current jeans or getting that much closer to your dream home?

You have to find your own way to enjoy savings and the rest will flow. Having more savings in hand can provide an opportunity for a larger down payment but also shows a higher sense of reliability.

5. Monitor your credit score

Your credit score seems like this ambiguous concept until it’s time to buy a house. Then all of a sudden it feels like it matters.

Stay up to date on your own credit score so it’s not a shock when your mortgage broker runs it through. This is an important way to find any errors that may exist and correct them before it impacts you long term.

In general, you should be aiming for over 700 in Canada. Get it between 800 to 900 and you’ll be in a good position for your approval!

6. Unlink joint accounts

If you don’t look into your credit score, it’s easy for things to slip between the cracks. If you’ve ever opened joint accounts, best believe that other person’s credit score can affect yours.

Old roommate never pays their bills? Ex-boyfriend has a beyond horrible credit score? Emptying out the joint accounts may make you feel secure, but you’re not truly safe until every account is legitimately unlinked.

7. Pay your bills on time

This is one of the largest contributors to a poor credit score.

Pay your bills on time. Set specific calendar days where you pay all bills or set reminders in your phone. Just pay them on time. It’s worth it.

8. Collect a bigger down payment

While a down payment isn’t the biggest factor considered when applying for a mortgage, it certainly helps. The higher the down payment, the higher your mortgage approval (in general).

A higher down payment is also a great way to score better interest rates for your mortgage that can have lasting long term benefits. Finding a way to bring a bigger down payment to the table means saving more going forward and future you will love you for it.

9. Consider a co-signer

Nobody likes being forever tied to their parents, but sometimes it’s worth it. With a co-signer, you are still the main owner of your home but your co-signer is a form of guarantee that you won’t default on your payments.

It essentially says, “Hey if something happens and I can no longer afford this, Mama’s got my back.” This is obviously super comforting for banks and lenders and can have a huge impact on your mortgage approval. But keep in mind, it’s a pretty hefty process and your co-signer will have to provide a lot of the same information as you.

10. Go in on it with a partner

Co-owning can be sketchy territory, so don’t do it just to do it. But finding a reliable partner means splitting the down payment and maintenance costs in half and applying with a significantly bigger income.

There’s no hiding this is a great way to get a better approval, but it can also lead to some messy years if you don’t pick the right partner!

11. Shop around

It’s common to head straight to your bank for your mortgage. In fact, 60% of Canadians go to their bank instead of a mortgage broker.

Both are viable options, but shopping around to find the best deal possible will quite literally get you the best deal possible. Explore other banks, chat with mortgage brokers, and find the fit that’s going to be right for your specific situation.

Disclaimer: I am not a mortgage specialist and the above should only be taken as loose advice. Please contact a mortgage specialist or bank for formal advice.

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