Preparing your credit for a mortgage application

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While it's easier than ever for Canadian homebuyers to lock in low mortgage rates, it's important for individuals to understand how their credit will influence the process. While current mortgage rates are currently at historically low levels, the best rates will only be made available to borrowers who can show exemplary credit on their mortgage applications. It's with this in mind that prospective homeowners should do all they can to prepare their credit for the mortgage application process.

Check your credit score
The first step for homebuyers should be to receive a copy of their credit report. Canadians are allowed to order as many free copies of their credit report as they require each year, as long as the request is made in writing for a printed copy delivered by mail. While these requests will be noted in an individual's report, they will not affect their credit score. Continue reading

How to avoid a credit repair scam

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From the time we get our first job to when we get our hands on our first credit card, we are constantly informed of the importance of maintaining a strong credit rating. In Canada, just like many other countries throughout the world, people with good credit are more likely to obtain financing for a car loan, mortgage, insurance or another big-ticket expense than individuals with poor credit.

Credit can be a needed boost, but it can also be debilitating. Learning how to protect yourself from becoming a victim of fraudulent activities is one way to keep your credit score and report in strong standing.

Several companies make the bulk of their money by targeting poor-credit consumers with promises to clean up their credit report. A promise many hurting consumers will believe because they need assistance to qualify for a new home or expense. But in most cases, the companies cannot deliver on their promise, leaving the consumer with more debt and in a worse hole than when he or she started the process. Continue reading

Upgrading credit scores for a mortgage application

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For those checking with mortgage brokers in preparation for buying a home, having a good credit score can be important. The Canada Mortgage and Housing Corporation says there are a number of legitimate ways to improve a score.

The CMHC says a credit score is one of many factors mortgage professionals will consider. For those in Canada who don’t know their score, they can obtain a free credit report through the mail from Equifax or TransUnion, or pay a fee to see it online.

The agency says some consumers may not have a credit score, if they haven’t used credit cards or other loans before. The CMHC says an easy way to get started building credit is to apply for a credit card and use it regularly.

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Preapproval can be a good step for first-time buyers

For many potential first-time homebuyers, beginning a home search can seem daunting. However, Regina Leader Post contributor Barbara Hitchens says those people may want to fill out a Canadian mortgage application for a preapproval before they start attending open houses.

A free preapproval, Hitchens says, will allow buyers to see how their credit reports would affect any potential home loans, and give them a set price range they should stay within when looking at homes.

Taking that step, she adds, will prevent buyers from finding the “perfect home” and then finding out that they can’t actually afford the payments needed to buy it. It can also help buyers show sellers and real estate agents that they are serious about the process and are a legitimate buyer.

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Credit scores can be the difference for some borrowers

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With the low Canadian mortgage rates being offered by lenders across the country, many consumers are looking to buy a home that they otherwise might rent. However, Financial Post columnist Gary Marr says that people's credit scores could keep many from getting the best rates.

Marr writes that many consumers aren't aware that there may be mistakes on their credit reports that might drag down their scores, and their ability to qualify for a loan.

"A number of things can happen if you don't have a good score. Right now, 680 seems to be the cut off for buying a home with mortgage [default] insurance," Vince Gaetano, a broker, told the paper. He added that those below 600 would likely end up paying higher interest rates as well.
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Methods of Improving Your Credit Score

What's your Credit Score? Find out today!

Your credit score, also referred to as a Beacon or FICO score, is one of the weightier elements used by lenders to determine your eligibility to receive financing and to decide the rate they feel justified in charging you on your mortgage. Beacon scores tend to range from 300 to 900; 900 being perfect and very uncommon.

The average Canadian scores around the 700 mark. This grade, or greater, will secure you the best mortgage rates in Canada. For every ten points below 700 you are basically looking at a hike of one or two basis points, or 0.01-0.02 per cent, on the rate you are offered, down to 600 points. Below 600, down to 500, rates start spiking one to three full percentage points above the best rate available and qualification becomes more difficult, though not impossible.

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When is the Last Time You Checked Your Credit History?

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Credit worthiness and the availability of money are always of interest to the mortgage shopper. We will discuss, in brief, just how important your credit rating is.

The old saying “Cash is King” rings true when it comes to purchasing power. When banks and mortgage companies talk about borrowing power, the adage changes. Now “Credit is King”.

Your credit history plays an integral part in the underwriting process of a mortgage application. Consider credit an indication of the risk level associated with the application. If credit is poor, risk goes up. If credit is good, the lender will view the application with much less hesitation. This often directly correlates to what mortgage rates they will offer.

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