"What is it that the banks are looking for when they're processing my application? When you ask me what my credit is or when you ask me what my income is, is that good or is that bad? What kind of bars and hoops do I have to jump through and over in order to get a mortgage from a bank at a good rate?" Well, there's five main criteria that banks look at when they're doing a mortgage. So I want to go through each of those five aspects, and let you know what it is that they're looking for. But, however, I will prelude this discussion with: Each bank goes after different clients. Much like Lexus goes after different ones than Toyota, same with banks. Banks have boxes that you need to fit within, and that box is not going to fit everybody. And, for some people, they're squeezing in, which means they're not getting the best rates or the best products for their situation. Other people are getting great products and great things for their situation.
But it's one of the benefits of going through a broker, you're able to have someone look at all of the lenders and just say, "Which one has the right product and box that we can fit you into easily, give you a good rate, and the perfect product based on your situation?" So, with that being said, here are the five things.
Income is always going to be a big one. The reason that the banks want to know what your income is they want to know can you pay the debt back. They want their money back at the end of the day. And so things that they're looking for there are how long have you been working there for? How long have you been working in the industry for? What was your last year's income? What was the year before's income? Are you making a salary or is it more of a variable payment like commission or bonuses or hourly? They're going to want to know all of those details. And it's their right to know because this is going to prove to them that you have the means to pay them back. After all, this is a large sum of money and it's not just anybody's money, it's that bank's money. And they want to make sure that they get it back.
So income is a huge thing. A couple notes that I'll make on that is they want to see two years in that job or, at the very least, in the industry. That's going to make it stronger of an application. They also obviously love salary jobs but, if you are commissioned or anything variable, what they'll do is they'll take a two year average of your income.
So income, obviously with that then comes debt. They're very concerned about debt because then they're going, "OK, well, just because you make 100 grand, you owe 100 grand! So this doesn't make sense." They're going to basically say, "Well, after all of your mandatory debts..." And mandatory debts that they're looking at are things like credit cards, lines of credit, car payments, other mortgages, property taxes, and heat for some. As well, is there a need for child support, alimony, things like that? Basically, debts where, if you did not pay them, there would be consequences. So owing your buddy money, not a big deal. Car insurance, not a big deal because, at the end of the day, you can not pay car insurance. All that means is you can't drive on the road. Car payments, if you stop paying, they take the car away. So those are mandatory debts. Then what they do is they say, "OK, these are your debts. This is your income. How much is leftover? And can you afford a mortgage of the size that you're looking at?" So those are very important, probably the two most important.
Then we've got credit. Credit's a big thing. Credit is more of a window thing. So if you make 680 or above, if you make between 650 and 680, and if you make below 650 to, say, 610, then below 610, those are the four main categories I'd say. When it comes to 680 or above, you can get a mortgage with anybody. Everybody will love you. If you have between 650 and 680, everybody will still love you. They just might not offer you all of their A+ products, which means great pre payment options, things that go into a good product. And then, if you're below 650, you're getting into more B lending. There's less lenders that will want to look at your file. They won't be as generous with the products that they're allowing you to have. And, if you get really low, like below 610, most won't even look at you. For the couple that will look at you, they're going to want maybe lots of skin in the game. They're going to offer you a higher rate, things of that nature. So credit's very important. And that's something where, if you want to know your own credit score, check out my other videos, and I go through the process as to how you can pull it.