To secure a mortgage in Canada, you need a fair credit rating of 600 or more. You want to have the highest score of over 600 to achieve to get the best interest rate. You can still get a higher rate mortgage with a fair credit rating. Here are some tips to get a home loan in Canada.
Pay Off Outstanding Debts on Your Credit Report
The lower your credit card balance, the better you look to secure a mortgage at a good rate. But that’s not always possible. The most important balances to pay off are the outstanding bills reported to the credit agencies.
Save a Large Down Payment
Financial institutions look at several factors when deciding to approve your home loan. Although your credit score is essential, they’ll also consider your debt-to-income ratio and the amount you’re putting down. If you have a poor or fair credit rating, consider saving 20 to 5% down. A large downpayment also lowers your overall mortgage and looks great to lenders.
Improve Your Debt-to-Income Ratio
Your debt-to-income ratio takes into consideration your gross monthly income and your other expenses. It looks at car loans, credit car minimum payments, student loan bills, and different required amounts due. You need to keep the ratio under 43%, with most lenders preferring a debt-to-income ratio of 33%. This shows finance companies and banks how well you manage your money. It also helps indicate if you have enough disposable income to deal with emergency repairs, tax increases, and other expenses related to homeownership.
Use a Finance Company that Specializes in Low Credit Scores
If you’re credit’s on the low end of a fair credit rating, you could benefit from a mortgage lender specializing in credit issues. These agencies work outside the banks to get you the home loan when your credit score is below the 600-mark. These lenders are great when you have less than perfect credit, but they will have additional costs involved.
Consider a Co-Signer
When someone co-signs for you, it gives the bank or finance company more reassurance that the co-signer would be responsible if you didn’t pay the loan. It also places more incentive for both parties to care for the home and keep it in good standing to prevent reducing the value. A co-signer can also help you get a lower rate and save money.
To save money on your home loan, try to boost your FICO score to good, which is between 670 and 739. It can take time to build your credit, but the result is worth the money it saves in the end. If you raise your credit score significantly after purchasing your home, you may be eligible to refinance for a lower rate. For more information on how to secure a mortgage, contact Altrua Financial today.