How much can I get pre-approved for a mortgage

Welcome to Homebuyer's School brought to you by Brookfield Residential Hi everyone and welcome to another edition of Homebuyer's School

Today I'm joined by Mujtaba Syed, a Mobile Mortgage Specialist with TD Canada Trust And today the question we're gonna answer is -and one that's very, very I guess, a very popular question is, "How much can I actually get pre-approved for a mortgage?" So Mo, how much, if I go right now to talk to you or a mortgage specialist, what's the maximum I can get pre-approved? That's a really good question Karl, so technically what we look at is we'd look at a bunch of different factors when we're looking at the amount that you can get pre-approved for The most important thing we do look at your credit score, now a credit worthiness is an important part of the approval process, so there are certain criterias and guidelines we like your credit to be at to see maximum – minimum approval amounts I'll try to explain a little bit more So if your Beacon score is technically above 680 where we want to be at, we want your TDS, which kind of stands for Total Debt Ratio

So a total debt ratio is what we take, is we take your income, we take your monthly obligations, plus the new monthly obligations of your home you're looking at buying, which is going to be your mortgage payment, property taxes, utilities We want it to be around 44% of your income, and the reason why the banks want to be able to do that is we want the extra – 56% to be available just in case you might need it We don't want you to be house poor for sure So if you're Beacon score is above 680 we can go to a maximum 44% of your TDS But unfortunately if it's lower than 680, we want to be at 42% of TDS and these are just bank account and guidelines that we take a look at

We also look at something called GDS which is your Gross Debt Ratio which is just technically the housing cost we talked about So the housing cost once again is just your mortgage payments, your property taxes, and your utilities that technically could be part of the home We want that to be once again if your Beacon scores around 680, we want that to be around 39% which is the maximum Now, you know if your Beacon scores less than 680, we unfortunately can't go more past 35% once again, just bank account of rules to kind of see exactly how much you get pre-approved for When you're talking about, so let's step back a bit here

What is a Beacon score? Just for those who don't understand Absolutely, so a Beacon score is a credit score and it's a whole bunch of different things that combine into making like a "risk rating" for the bank So what we do we can look through a whole bunch of different situations We could look at how long you've opened your credit bureau, what kind of debts you have on your credit bureau, how you make your payments, if you switch your job frequently we want to be able to show stability So if you switch jobs often or you move addresses often, that could actually result in a lower score, or we want to show stability, we want to show comfort so technically a score where I like to explain to my clients is just a statistic

So once when we say someone has a beacon score of 680 it just means to the bank that 1 out of 680 people were most likely default on a loan compared to someone who might have a beacon score of 700, so 1 out of 700 is less riskier to the bank compared to 1 out of 680 or even 1 out of 600 So that's how the bank's look at it It is a little bit more complicated, a little complex, but it's just a brief idea of who you are as a person technically, how you come across to the bank Does a previous mortgage affect your Beacon score as well? Absolutely yeah A previous mortgage could definitely affect and depending on your repayment, how you made the payments, the amount, it could definitely impact in a positive way or it could impact in a negative way

Does a- would it would you recommend then having let's say you know, let's say you're in the process of selling a home and looking to buy another home, either another home or transitioning out of that, in your opinion would it be better to make sure you sell your home first or it doesn't really matter? Yeah, to me I don't think it really matters because when we actually look at the pre-approval process we can factor all that into the application We can look at what makes the most sense for you If it makes the most sense to you because you feel like selling based on your financial obligations, we can look into that We can also look in getting your pre-approved or approved for a mortgage by currently holding that property as well A lot of people think they want to sell but then decide that they might want to turn into an investment property or rental property, there are many, many different ways we can work on to the application, there is no just one way to kind of do that

One question I always wanted to know is "should I max out in terms of how much I can get pre-approved for?" Yeah, so once again it just depends on where your comfort level is If you think that that's your dream home and you're very comfortable with it and you see yourself moving in there and living in there for a very long time you might consider buying that house, it might be a little bit close for maximum living, but you might know that your income potential is just gonna keep on getting more and more, and that's something that definitely you could speak to your specialist about I always tell my clients as long as you're comfortable with the payments make sure you do the monthly budget, those monthly obligations, and see exactly where that fits in based on your lifestyle If that makes sense for you based on your lifestyle, it's a comfortable payment, you don't feel you're stretched or you don't feel that it's a little bit too much for you, that's the ideal place to be in my opinion Great, do you have anything else to add? No I think that's technically it

Once again we just want to reiterate that, just really sit down with your specialist, talk about your obligations, talk about your financial situation, talk about where you see yourself in the future, all that could have a really big impact on your decisions today We want to be able to look into the future and see does this make sense in the future as well, not just today Perfect, well thank you very much Mo, thank you very much everyone for joining us and we'll catch you next time That's another edition of Homebuyer's School Tune in next time for more expert tips and tricks, and visit homebuyersschool

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