How important is your credit score when purchasing a home and you need to secure a mortgage?
Credit scores hold a critical part of any purchase especially for high ratio mortgage qualifying where a purchaser has less than 20% as a down payment. A high ratio mortgage is an insured mortgage by either CMHC or Genworth. The majority of purchases are high ratio financing and having a credit score under 700 makes it almost impossible to obtain approval however remember there are other variables that are also considered.
The Equifax Credit Score TM ranges from 300 – 900. Higher Scores are viewed more favourably. This score is calculated from the information in your Equifax Credit Report. Most Lenders would consider yoru score very good. Based on this score, you should be able to qualify for credit with competitive interest rates, and a wide variety of credit offers should be made available from you – Per Equifax
Range | 300 – 599 | 560 – 659 | 660 – 724 | 725 – 759 | 760 + |
| Poor | Fair | Good | Very Good | Excellent |
Canada Populatons | 4% | 10% | 15% | 14% | 57% |
The terminology of revolving credit is a history of revolving payments towards credit cards, lines of credit car loan payments or any type of loans/payments. It is important to have a minimum history of two years of revolving credit otherwise you may get turned down on mortgage financing.
Investors require the same type of history to identify their credit level and to have a mid 700 – 800 credit score. They also require a minimum down payment of 20% of the purchase price for a conventional mortgage and they have a choice of either 25 or 30 years amortization period. Many investor choose 30 years amortization to obtain a maximum return on their investment to allow a positive cash flow.
A B Lender generally will accept high ratio mortgages when the credit score is under 700 however the interest rate will be much more than an A Lender. Their interest rates could run 4.5% to 5% and the lender and mortgage broker will charge fees. The rate of interest seems to be about 2 – 2% higher than posted rates which in todays market are around 2.6% for a variable rate mortgage which are closed mortgages and the rate fluctuates through the term. A fixed rate is where the rate does not change over any term. Some Buyers prefer the fixed rates which they consider safer however it has proven over the last 5 years to 2014 years that variable rate mortgages are good option for Buyers because their average rates have been lower.
Preapproval Mortgage System changed in July 1, 2012
The banks use to use a computer system from the insurers to submit a purchase request for mortgages and preapprovals could be provided within a day. In July 1, 2012, the preapproval system was shut down. Today it takes considerably longer, Buyers have to wait a week or maybe longer for preapproval.
How to Fix your Credit Score
There are companies that handled debt consolidation. Linda and the Pinizzotto Team can also help you in this direction. These companies will review your credit score and could potentially move your score from a range of 400 to 500 so that within a period of time your score could be in the 700’s. You could have a situation where something that has been paid off is still showing on your credit, or a consolidation of payments makes things more monthly affordable. Advice to improve your poor credit or the information that helps create a better credit history is vital in the big picture of having good credit.
How to Find Help
Linda and the Pinizzotto Team guides all their clients, Buyers and Investors with their mortgage financing approval. They are provided with information relating to the process and ensures they received the right mortgage approval working with various reputable mortgage consultants. Don’t get caught mortgage shopping and completing various mortgage applications. It will hit your credit and potentially bring down your credit score down. It happens and it is hard for Linda and the Pinizzotto Team to change especially if your credit is at borderline. The process of secure a mortgage, finding and buying a property needs expert guidance and advice. Let us help you do that the right way.
Contact Linda Pinizzotto and the Pinizzotto Team
The right way to get started is to have an experience, successful and knowledgeable Realtor at your side throughout your life.