Good credit gets you lower rates! Sweet!
First time home buyers face plenty of obstacles, but it’s worth it! Demonstrating creditworthiness is one of them, which all comes down to your ability to manage credit. Interest rates are based on this. Lower interest rates and a lower credit rating could save you thousands of dollars. Before granting credit, lenders look at several factors, and these are called the “Five C’s”:
Character, Capacity, Capital, Collateral and Conditions.
Character:
It’s all about YOU and whether or not paying your debt on time is in your nature. Factors that determine your credit character include:
Are you habitually on time with your bills
Are you delinquent with any bills
How much debt do you have
and how do you use your credit
Tip: Don’t use all or most of your credit. If you use more than 70% of your monthly credit limit, you’re better off increasing your credit limit. Pay off balance every month, before interest charged. That will help You to increase Your credit score very fast.
Capacity:
You’re also rated on your capacity. Payback ability measures cash flow versus debt, plus your employment history.
What’s your tenure at your current employer?
What’s your self-employment history?
The AMOUNT YOU CAN AFFORD isn’t what YOU think you can afford, it’s what the LENDER has determined you can afford based on your debt service ratio. You divide your total monthly debt payments by your gross monthly income to see if you can pay back the loan. With bank mortgages must be under 45%, with private mortgages it is determined by Your lender, they are flexible.
Capital:
A borrower’s capital is the money they put towards a loan. For mortgages, the down payment counts. Higher contributions often mean better mortgage rates and terms. With a 20% down payment, you don’t need default insurance. Consider how much you have saved and how you’ll pay your down payment. How will you do it? Through an RRSP? Maybe someone in your family will give it to you.
Collateral:
Secured loans are secured by collateral. A vehicle is usually used as security for an auto loan since the vehicle is repossessed and resold if the loan is defaulted. When it comes to mortgages, lenders usually take into account the value of the property you are purchasing. A mortgage lender may deny you for a loan if your net worth is negative. The case for collateral-backed loans is generally more secure, and the rates and terms are generally better.
Conditions:
Terms of the loan can also affect the lender’s willingness to provide financing. Consider factors such as the interest rate, loan terms, and loan tenure. Loans for specific purposes are more likely to be approved by lenders, such as mortgages, car loans and home improvements.
There are a lot of reasons to hire a pro!
Time to realize now, how important is Your credit score and your borrowing habits. Higher credit score makes Your lender to be more willing to lend You a mortgage. Want more information? Please don’t hesitate to reach out to me today to discuss Your situation. When You want to finance a new or refinance an old mortgage, or just want to access Your home equity I am always available for You.
Credit issues?
Now, there are mortgages available for people from Private Lenders, the catch is You must have at least 20% down payment. Interest rates are much higher, but You can establish home ownership now. Of course we will work with you to get rid of the disqualifying issues to return to bank once Your credit fixed!
