7 Steps to Prepare Your Mortgage Application

June 13, 2012

Lining up outside on a cold January evening isn’t my idea of a fun time. Teeth chattering. Ears frozen. Fingers numb.  Yet, there I was, with my friend, trying to get last minute tickets to a show.

I could have bought the tickets from the warm comfort of my home. The price for my lack of preparation: deal with the cold. That’s when my buddy dropped the 5 Ps on me. “The what?” I asked. “You know, the 5 Ps. Proper planning prevents poor performance.”  Boy did I learn a simple and profound lesson about preparation that night.
7 Steps To Help Prepare Your Mortgage Application
Arranging a mortgage for the purchase of your home requires planning. If there ever was a time to follow the 5 Ps it’s when you buy a home. Here are 7 steps to planning and preparing your mortgage application.
1. Check Your Credit Report Get a copy of your credit report from either Equifax or TransUnion. Check to see what your credit score is and follow the credit reporting agencies recommendations to correct any mistakes or disputes. If you would like to understand your credit score click here.
2. Pay Off Your Outstanding Debt  As you prepare for your mortgage application it is better to payoff any large credit balances than saving up for a larger down payment. Responsible behavior contributes to your overall character assessment by the mortgage lender.
3. Avoid Applying For New Credit If possible avoid opening new credit card accounts or lines of credit. Large purchases especially automobiles can dramatically effect the total mortgage amount you qualify for.  It is best to show stability to the lender and wait until after you purchase a home to make any large purchases.
4. Save Money For The Down Payment Although it is possible to get a gift from a family member for the down payment the lender prefers if you can also show that you’ve had the ability to save money. The lender expects to see the source of your down payment money so make sure you can show a paper trail for transparency. In addition to the down payment (minimum 5%) you should save money for the closing costs which are estimated traditionally as 1.5% of the purchase price.
5. Employment Stability The lender looks to see that you have employment stability. Try to avoid switching jobs before applying for a mortgage. If you are just starting a new job the lender requires confirmation that you are past the probationary period. If you are in business for yourself the lender will ask to see two years of tax returns to determine your income and stability.
6. Gather Paper Work Once you feel you are ready to move forward put your ducks in a row. Having paperwork ready before you visit a mortgage broker or lender makes for a smoother transaction and allows for more meaningful feedback and numbers when you apply.

  • Identification
  • Proof of employment through an employment letter
  • Copy of a recent paystub
  • Copies of your last 2 years Notice of Assessment if you are self employed or commissioned
  • Proof of down payment through copies of recent financial statements (bank accounts, investments)
  • Copy of your credit bureau

7. Get Pre-Approved  Before seriously moving forward and working with a real estate agent or making an offer you should meet with a mortgage broker to get pre-approved. The pre-approval will give you a very specific number to help you determine exactly how much the lender will be willing to lend you and how much it will cost to carry the mortgage to make sure that you are within your budget.
Scottish poet & author George MacDonald once said “the best preparation for the future is the present well seen to.” Although your mortgage application is just a part of achieving your life’s aspirations of becoming a homeowner, being prepared will ensure that you are able to arrange the best mortgage with fewer bumps along the way.


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.