When you’re young and just getting started in adult life, your financial considerations and priorities are, well, different.
That all changes with major purchases, such as a house and the mortgage that comes with it. Some of us gave a passing thought to having a mortgage in our years of youth. Most of us didn’t know we had to “qualify” for a mortgage...because nobody had yet enlightened us to that reality. These days, qualifying for a mortgage can be more complicated than ever, because of housing prices in the Lower Mainland, and the Federal Government’s “stress test” for first-time buyers sets the income bar high when you live in big city. However, the basics of qualifying for a mortgage never change.
You have to have a down payment. You have to have a solid credit rating. You have to have some kind of history that shows you’re financially responsible.
So if you (or someone close to you) are new to the world of real estate, it starts with your credit score. Check with one of the major credit bureaus to see if your credit score is 640 or higher. That’s the benchmark for applying for a conventional mortgage. If it’s below 640, you will have to research alternative lenders and you can expect to pay a higher interest rate. The higher your credit score is, the better.
Here are some ways that may help you improve it:
Pay your bills promptly. This not only saves you interest but also shows creditors that you are responsible.
Use a credit card frequently (and pay it off). That helps to establish good credit, even with small purchases, because having no credit is almost the same as having bad credit.
Search your credit report for errors. Banks can make them and any you find need to be reported to the credit bureau to raise your score.
If you already have debt, consider increasing your credit limit so that you have 30 per cent of your credit “available.” Lenders like that. As an example, if your credit limit is $10,000 and your debt is $8,000, you only have 20 per cent of your credit available.
Reality can be scary for new home buyers, but it doesn’t have to be, if you do your homework and then do the right things.
Need more information? Call Jennifer (604-726-8768) or Dale (604-922-3353) any time.