You may be considering the option of buying a home. Home ownership can have a host of benefits, allowing Canadian residents to customize their property to meet the needs of their lifestyle and to begin building equity in their own home. Many Canadians have made the switch in becoming homeowners. And though some people can pay for their home entirely in cash, others cannot. For those that cannot pay for a home in cash, a mortgage may be necessary. A mortgage is a loan to buy a home where the home becomes the collateral for the loan, (also called a mortgage).
There are several requirements for obtaining a mortgage, a key requirement is a credit score. Applicants will need to prepare to apply for a home mortgage loan. One main factor in applying for a mortgage is the applicants credit score. A borrowers credit score serves as a reflection of a potential borrower's ability to make timely payments on a home loan.
What Is a Credit Score?
A credit score is an important reflection of a mortgage loan applicant's credit history. Typically, applicants with higher credit scores are more easily approved for a home mortgage loan, as long as other requirements are also met. Higher credit score also may mean better terms, such as a lower interest rate, for an approved borrower. A lower loan interest rate allows a borrower to pay less in interest cost over the lifetime of the loan. A borrower with a good or excellent credit score may also qualify for an instant approval on a home mortgage loan from a particular lender, making it easier to begin searching for a home.
Where Can You Get Your Credit Score?
Potential home buyers may not know what their credit score is and not be aware of which agencies to reach out to in order to get their credit score and credit history. The three agencies to contact are Experian, Trans Union and Equifax. A FICO score may be a term used instead of that of credit score with these agencies. Request a credit report to learn more about one's credit score and history and to begin making any necessary improvements.
What About Credit History?
Lenders are interested in the details of a potential borrower's financial past. Payments on auto loans and credit cards, late payments and previous bankruptcies will be apparent on a credit report. A lender is looking to work with a borrower who can demonstrate a history of consistent payments on debts, as well as reviewing the amount of debt and length of credit history. Lenders do this to assist them in making a determination about whether to move forward with a mortgage for the borrower.
What About a Low Credit Score?
In certain cases, a mortgage applicant with a low credit score can obtain a mortgage. Though defaulting on a previous loan or making late payments will lower one's credit score, which will make them less likely to be approved for a home mortgage loan. However, this does not mean that those with a poor credit score cannot get a home mortgage loan. Since there are other factors involved in the mortgage process, a low credit score may not preclude getting a mortgage. In these cases, it's best to speak to a financial or mortgage professional.
How Can You Begin to Improve Your Credit Score?
If you are thinking of buying a home, it can pay off to find out what your credit score is. If the score is low, or needs improvement, then an investment of time and effort may be required to investigate how to improve ones credit score.
After receiving one's credit score report, review it for any inaccuracies and take steps to remove those from the report. This may have to be done with each agency separately. It's generally recommended that those with a high level of debt should consider paying down the debt. They should then continue to make on-time payments on any remaining credit card balances and other smaller loans. In the meantime, one should avoid applying for additional lines of credit or closing a credit card. These actions may negatively affect ones credit score.
Buying a home in Glenrosa is one of the biggest steps anyone can take. And one of the first steps in buying a home is knowing the details of ones credit and credit score. In addition to the assistance of a qualified real estate agent, the services of a mortgage broker or lender are very important as well. A mortgage lender can help a potential applicant learn more about the ones credit score, as well as the mortgage process, to eventually be approved for a home loan.