Credit 101
Check Your Score
If you are unsure of your credit score, there are two credit reporting agencies in Canada Equifax and TransUnion. Understanding and managing your credit score is indeed crucial when it comes to qualifying for various real estate loans such as mortgages, HELOCs (Home Equity Line of Credit), or other forms of credit.
A credit score of 680 or higher is often considered a benchmark by many lenders, particularly if the borrower is putting down less than 20% as a down payment. For those putting down more than 20%, the credit score requirement may be more flexible, but maintaining a high credit score remains advantageous regardless of the down payment percentage.
A high credit score demonstrates financial responsibility and reliability to lenders, which can improve your chances of securing favourable loan terms and interest rates. Regularly checking your credit score is a proactive step towards financial awareness and preparedness.
In Canada, individuals can obtain their credit reports from the two main credit reporting agencies: Equifax and TransUnion. Monitoring your credit score allows you to identify any discrepancies or issues that may affect your creditworthiness and take appropriate actions to address them. By staying informed about your credit standing and actively managing your credit profile, you can position yourself more effectively when seeking real estate financing and other forms of credit.
Building and maintaining a strong credit score is a foundational aspect of achieving long-term financial stability and success in real estate endeavors.
Build your credit
- Pay of debt! Credit cards, loans and lines of credit
- Stay within the limits on your cards
- Pay your bills on time and in full
- Don’t apply for any more credit cards
Budgeting 101
Creating a budget helps you focus on properties in your price range as well as strategically build financial stability around your real estate investment and your ability to make your mortgage payments. When planning on a real estate investment, you need to consider two separate yet equally important costs, A) the purchase price and B) cash flow; when you add in your cash flow budget to the down payment of the property you may find out that what you qualify for is greatly different from what you can afford.
To drive your mortgage awareness and facilitate your budget building there are various free apps that you should check out: Canadian Mortgage app (Amazon app store), My Mortgage Toolbox (Google play Apple app store), or MoneyBook (Microsoft App store) these apps can help you picture your home affordability, mortgage payments, and your closing costs. These apps are only tools to help you budget, you must do the work.
Once you have your down payment, you must remember to have your closing costs as well. Closing costs can run between 1-4% of the total purchase price.
Down payment 101
Your down payment can accurately be determined once a proper budget has been realized. It is important to note you can secure a mortgage with as little as 5% down; ideally you should aim for 20% or more to avoid having to purchase default insurance.
One important thing to remember is that if your property purchase is $500 000 the minimum down payment can 5% over that from $500 001 to $999 999 is 10%. If the property you are purchasing is $1 000 000 and over a 20% down payment is required.
If you are a first-time home buyer you may use up to $35 000 ($70 000 for a couple) of your RRSP, and gifts from immediate family members are also excepted.
Once you have your down payment, you must remember to have your closing costs as well. Closing costs can run between 1-4% of the total purchase price.
Mortgage Options 101
Understanding your mortgage options is central to making an informed decision. What is a fixed or variable rate? What are penalties and when are they applied? What does ‘term’ mean? How will payment frequency effect my mortgage? Knowing the lenders and understanding the programs they offer will be the greatest advantage you have in obtaining a mortgage that suites your needs.
MYmortgagenow.ca professionals have access to an abundance of lenders and are in constant contact with them so they can analyze their products and describe the best options for you. Now your ready to get pre-approved!
