Buyer Tips - RateLocator.ca

5 Essential Tips for Your First Mortgage Application

Feeling overwhelmed? These five tips will help you prepare for a successful mortgage application in Toronto.

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Securing your first mortgage is a monumental step towards homeownership, especially in a competitive market like Toronto. Preparation is key to ensuring the process is smooth and successful. Here are five essential tips to guide you.

1. Strengthen Your Credit Score

Your credit score is a primary factor lenders use to determine your reliability. A higher score often leads to better interest rates. Before applying:

  • Check Your Report: Obtain a free copy of your credit report from Equifax or TransUnion and check for any errors.
  • Pay Bills on Time: Consistent, on-time payments are the most significant factor in your score.
  • Reduce Debt: Lower your credit utilization by paying down balances on credit cards and lines of credit. Aim to use less than 30% of your available credit.

2. Get Your Documents in Order

Lenders require extensive documentation to verify your income, employment, and financial stability. Having everything ready will speed up the process immensely. Gather the following:

  • Proof of income (pay stubs, T4s, Notice of Assessment)
  • Employment letter stating your position, salary, and length of service
  • Statements for all bank accounts and investments for the last 90 days
  • Proof of down payment funds
  • Information on any existing debts or financial obligations

3. Understand the True Costs of Homeownership

Your mortgage payment is just one piece of the puzzle. Be prepared for other expenses:

  • Closing Costs: These typically range from 1.5% to 4% of the purchase price and include legal fees, land transfer tax, and more.
  • Property Taxes: Research the municipal property tax rates for the areas you're considering.
  • Home Insurance & Utilities: Get quotes to understand these recurring monthly costs.

4. Get a Mortgage Pre-Approval

A pre-approval is a conditional commitment from a lender for a specific mortgage amount. It shows sellers and real estate agents that you are a serious buyer and gives you a clear budget to work with. This is arguably the most important first step before you start looking at homes.

5. Work with a Mortgage Professional

Navigating the mortgage landscape alone can be challenging. A professional mortgage broker or specialist can access rates from dozens of lenders—including banks, credit unions, and trust companies—to find the best product for your specific situation. Their expertise can save you thousands over the life of your mortgage and simplify the entire application process.