How to improve your credit score

When applying for any sort of loan, one of the most important metrics a lender is going to look at is your credit score.

But what really is a credit score, who keeps track of it, and most importantly, how can you improve yours?

There are a few simple ways to keep your credit score in good shape.

First off, prioritize paying your bills on time. Missing payments on your credit cards, lines of credit and so on, can have a very negative impact on your score.

You can spend an entire lifetime building up for good credit. All it takes is one mistake to negatively impact you.”
Second, try to keep your credit cards at no more than 65% of their limit. This is the sweet spot that credit scorers are looking for.

Thirdly, you should avoid the “free credit score” services out there because they’re just looking to sell you credit, or sell your information to someone who does.

When you’re looking for credit, what they’re going to ask you is, ‘What are you looking for credit for?’ And you’re going to say, ‘Well, I’m looking to get a mortgage, or I’m looking to get a car loan.’ And then what they’re going to do is they’re going to sell your information to banks and mortgage brokers and people out there who are able to supply you with credit.

Instead, what you should do is go directly to the credit scoring companies. They’re required by law to give you your credit information directly, without affecting your score. TransUnion offers an online form, found here. Equifax has multiple types of credit reports you can order here.

You also want to try to limit the number of credit inquiries by different lenders. When you’re shopping around at different banks, the number of inquiries can add up as each bank makes an inquiry to see what they can offer you.

But as a mortgage broker, we have access to multiple lenders all at once.

You could effectively come see a mortgage broker, get one inquiry done, and that inquiry is good for 20 financial institutions, As opposed to having to go directly to every bank. If you have any questions, contact your local Dominion Lending Centres mortgage professional near you.

How to improve your credit score

When applying for any sort of loan, one of the most important metrics a lender is going to look at is your credit score.

But what really is a credit score, who keeps track of it, and most importantly, how can you improve yours?

There are a few simple ways to keep your credit score in good shape.

First off, prioritize paying your bills on time. Missing payments on your credit cards, lines of credit and so on, can have a very negative impact on your score.

You can spend an entire lifetime building up for good credit. All it takes is one mistake to negatively impact you.”
Second, try to keep your credit cards at no more than 65% of their limit. This is the sweet spot that credit scorers are looking for.

Thirdly, you should avoid the “free credit score” services out there because they’re just looking to sell you credit, or sell your information to someone who does.

When you’re looking for credit, what they’re going to ask you is, ‘What are you looking for credit for?’ And you’re going to say, ‘Well, I’m looking to get a mortgage, or I’m looking to get a car loan.’ And then what they’re going to do is they’re going to sell your information to banks and mortgage brokers and people out there who are able to supply you with credit.

Instead, what you should do is go directly to the credit scoring companies. They’re required by law to give you your credit information directly, without affecting your score. TransUnion offers an online form, found here. Equifax has multiple types of credit reports you can order here.

You also want to try to limit the number of credit inquiries by different lenders. When you’re shopping around at different banks, the number of inquiries can add up as each bank makes an inquiry to see what they can offer you.

But as a mortgage broker, we have access to multiple lenders all at once.

You could effectively come see a mortgage broker, get one inquiry done, and that inquiry is good for 20 financial institutions, As opposed to having to go directly to every bank. If you have any questions, contact your local Dominion Lending Centres mortgage professional near you.

Buying your first home is scary but it will happen. Read this great article from my colleague Geoff

First Time Home Buyers

Your First Home. What a THRILLING thing that is to think about!! One of the best parts about our job is helping individuals purchase their first home. We know that the process can seem daunting at first, but we have an in-depth understanding and knowledge of what steps are required to make the process go smoothly. Follow these and you will be turning the key into your new home before you know it.

1. Find a Fantastic Mortgage Broker
Finding a mortgage broker who can help with your pre-approval process can allow you to determine the price point of home you can really afford. Finding a mortgage broker right off the bat can also give you an advantage over working with your bank:

• Mortgage Brokers work for you, not the bank or lender
• They have access to multiple lenders and are not limited to one single product
• They are an expert in the field. They focus on mortgages and mortgages alone!

2. Get Comfortable With The Numbers
There are two numbers that all first-time homebuyers should keep in mind: 39 and 44. These two numbers can help you budget and determine what you can truly afford when looking to purchase a home. Why 39 and 44? Here’s why:

• A maximum of 39% of your total income can go towards your housing costs. This will cover your mortgage payment, property tax payment, heating costs, and strata fees.
• A maximum of 44% of your total income can go towards your housing costs and total debt payments. This will include ALL housing costs and all debt repayments (credit cards, car loans, student loans, etc.)

Now, here are a few other key numbers that can help you in your house hunting:

3. Know What Your Down Payment Needs to Be
You know the numbers, now let’s look at what you need to know about the down payment itself. First, if you have less than 20% down payment your mortgage will be insured and have insurance premiums added to your mortgage. If you are considering putting the minimum down, that would be 5% if the property is worth $500,000 or less. A down payment of 10% is required for any amount over $500,000. Here’s a quick example of what this looks like:

Purchase Price of $600,000

5% of $500,000                                   $25,000

10% of $100,000                                             $10,000

Total Down Payment:                                   $35,000

4. Take Advantage of The RRSP Home Buyers Plan
The Canadian government’s Home Buyers’ Plan (HBP) allows for first time home buyers to borrow up to $25,000 from you RRSP for a d own payment, tax-free! You are able to combine this with your partner if you are both first time home buyers you can both access the $25,000 from your RRSP for a combined total of $50,000. Certain qualifications do apply for you to use this plan, we have laid them out here for you to review.

5. Don’t Forget About the Closing Costs!
This is one so many people overlook! Closing costs are something that can add up quickly when you are purchasing a home. Here is an approximate breakdown of the funds you will need:

• Legal Costs: $1000
• Title Insurance: $200
• Appraisal: $350
• Property Transfer Tax: Pending on purchase price

An additional few facts on property tax for you to consider:

This is an approximation of what your closing costs may be, but it is always good to budget for them beforehand.

6. Have your Documents Ready to Roll
Mortgages = paperwork! There are a number of documents that you will need to have to give to your mortgage broker. This will vary depending on your employment situation and where your down payment is coming from, but here is a general list you can follow:

• Most Recent paystub
• Letter of Employment
• NOA’s (2 years)
• T4’s (2 years)
• Down payment verification—up to 3 months of bank statements
• Contract of Purchase and Sale (Your realtor will provide this)
• Property Disclosure Statement (Realtor will provide)
• if you are self-employed you may also have to show:
  o T1 Generals
  o Articles of Incorporation
  o Financial Statements

7. Start Working on Your Credit Score
Yes, your credit score does directly impact your ability to get a mortgage. Lender’s want to see that you can responsibly manage credit and debt repayment before loaning you a large sum of money to purchase a home. Your credit score will be a determining factor in the terms and rate associated with your mortgage.

Just what impacts your credit score? Good question! Here are a few things:

• Late payments will lower your score
• Collections, judgements, consumer proposals, bankruptcy this will lower your score
• Exceeded limits on credit cards
• Ideally, you will be able to show a minimum of 2 active and current trade lines
• The longer your trade line is, the better increase in your score!
• Lenders also like to see a minimum of $2,000 limit on your credit cards.

Understanding and using this knowledge can help make your first home buying experience a great one! Once you have gone through the pre-approval process with a mortgage broker the fun part begins! Upon you receiving your preapproval, you can begin the house hunting. From there, you can put an offer on your dream home (yay!) Once your offer is accepted, we go through the mortgage process with you and then it’s moving day for you!

This is an exciting time for first time homebuyers—we enjoy getting to help our clients go from start to finish and helping them get the keys to their first ever home. If you have questions or are looking to find out just how much you will qualify for you can check out our mortgage calculator OR you can reach out to a Dominion Lending Centres mortgage professional directly!

A guide to your Home Buyers’ Plan

Start at the beginning…
Registered Retirement Savings Plan = one of the best ways to save for retirement and your down payment and continuing your education. With an RRSP, your contributions reduce your taxable income. This is different from your TFSA (Tax Free Savings Account) which does not reduce your taxable income, but it does give you the added benefit of tax-free withdrawals. What does that mean? Well, with the RRSP you get a tax deduction meaning money back to you!
This is different from your TFSA, Tax Free Savings Account which does not reduce your taxable income, but it does give you the added benefit of tax-free withdrawals. But, reality is the RRSP will have a lower tax rate in retirement.
Everyone can save for their RRSP with as little as $50 per paycheque or more, depending on your budget. You can also go to your bank, sometimes your broker and see about a line of credit, that would be essentially secured by the RRSP, so that you contribute as much as you can qualify for. With this option when you get your refund, put those funds toward the RRSP loan, DON’T use it for the get away we all deserve!
An RRSP line of credit based on a 5-year term at prime rate +/- would equate to about $10,000 in a refund, based on 40% tax margin. If you retire in 25 years you would have approximately $107,296 in your RRSP and that is based on an estimated 6% annual rate of return.
Did you know that you can use up to $25,000 from your Registered Retirement Savings Plan, for each applicant, towards your down payment and closing costs this is the Home Buyers’ Plan (HBP)?
Do you meet the RRSP withdrawal conditions?
• Resident of Canada at the time of withdrawal

• You cannot withdraw more than $25,000

• Only the person who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP. Your RRSP issuer will not withhold tax on withdraw amounts of $25,000 or less.

• Normally, you will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.

• Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.

• Neither you nor your spouse or common-law partner or the related person with a disability that you buy or build the qualifying home for can own the qualifying home more than 30 days before the withdrawal is made.

• You have to buy or build a qualifying home for yourself, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1st of the year after the year of the withdrawal.

• You have to fill out Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.

Under the HBP, the home must better fit the needs of the disabled person than his or her current home. You can withdraw funds from your RRSPs under the HBP to buy or build a home, if:

• you are a person with a disability;

• you are buying or building a home for a related person with a disability;

• you are helping a related person with a disability to buy or build a home.

Regardless of the situation, you are responsible for making sure that all applicable HBP conditions are met. If, at any time during your participation period, a condition is not met, your withdrawal will not be considered eligible and it will have to be included as income on your income tax and benefit return for the year it is received. Valuable information at your fingertips and from your broker.

Check for more information at Revenue Canada here. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Would a Co-Signer Enable You to Qualify for a Mortgage?

There seems to be some confusion about what it actually means to co-sign on a mortgage… and any time there is there is confusion about mortgages, it’s time to chat with your trusted Dominion Lending Centres mortgage professional!

Let’s take a look at why you would want to have someone co-sign your mortgage and what you need to know before, during and after the co-signing process.

Qualifying for a mortgage is getting tougher, especially with the 2017 government regulations. If you have poor credit or don’t earn enough money to meet the banks requirements to get a mortgage, then getting someone to co-sign your mortgage may be your only option.

The ‘stress test’ rate is especially “stressful” for borrowers. As of Jan. 1, 2018 all homebuyers with over 20% down payment will need to qualify at the rate negotiated for their mortgage contract PLUS 2% OR 5.34% which ever is higher. If you have less than 20% down payment, you must purchase Mortgage Default Insurance and qualify at 5.34%. The stress test has decreased affordability, and most borrowers now qualify for 20% less home.

In the wise words of Mom’s & Dad’s of Canada… “if you can’t afford to buy a home now, then WAIT until you can!!” BUT… in some housing markets (Toronto & Vancouver), waiting it out could mean missing out, depending on how quickly property values are appreciating in the area.

If you don’t want to wait to buy a home, but don’t meet the guidelines set out by lenders and/or mortgage default insurers, then you’re going to have to start looking for alternatives to conventional mortgages, and co-signing could be the solution you are looking for.

In order to give borrowers, the best mortgage rates, Lenders want the best borrowers!! They want someone who will pay their mortgage on time as promised with no hassles.

If you can’t qualify for a mortgage with your current provable income (supported by 2 years of tax returns and a letter of employment) along with solid credit, your lender’s going to ask for a co-signer.

Ways to co-sign a mortgage

The first is for someone to co-sign your mortgage and become a co-borrower, the same as a spouse or anyone else who you are actually buying the home with. It’s basically adding the support of another person’s credit history and income to those initially on the application. The co-signer will be put on the title of the home and lenders will consider them equally responsible for the debt should the mortgage go into default.
Another way that co-signing can happen is by way of a guarantor. If a co-signer decides to become a guarantor, then they’re backing the loan and essentially vouching for the person getting the loan that they’re going to be good for it. The guarantor is going to be responsible for the loan should the borrower go into default.
Most lenders prefer a co-signer going on title, it’s easier for them to take action if there are problems.

More than one person can co-sign a mortgage and anyone can do so, although it’s typically it’s the parent(s) or a close relative of a borrower who steps up and is willing to put their neck, income and credit bureau on the line.

Ultimately, as long as the lender is satisfied that all parties meet the qualification requirements and can lessen the risk of their investment, they’re likely to approve it.

Before signing on the dotted line

Anyone that is willing to co-sign a mortgage must be fully vetted, just like the primary applicant. They will have to provide all the same documentation as the primary applicant. Being a co-signer makes you legally responsible for the mortgage, exactly the same as the primary applicant. Co-signers need to know that being on someone else’s mortgage will impact their borrowing capacity while they are on title for that mortgage. They’re allowing their name and all their information to be used in the process of a mortgage, which is going to affect their ability to borrow anything in the future.

If someone is a guarantor, then things can become even trickier the guarantor isn’t on title to the home. That means that even though they’re on the mortgage, they have no legal right to the home itself. If anything happens to the original borrower, where they die, or something happens, they’re not really on the title of that property but they’ve signed up for the loan. So they don’t have a lot of control which can be a scary thing.

In my opinion, it’s much better for a co-signer to be a co-borrower on the property, where you can actually be on title to the property and enjoy all of the legal rights afforded to you.

The Responsibilities of Being a Co-signer

Co-signing can really help someone out, but it’s also a big responsibility. When you co-sign for someone, you’re putting your name and credit on the line as security for the loan/mortgage.

If the person you co-sign for misses a payment, the lender or other creditor can come to you to get the money. The late payment would also show up on your credit report.

Because co-signing a loan has the potential to affect both your credit and finances, it’s extremely important to make sure you’re comfortable with the person you’re co-signing for. You both need to know what you’re getting into. I recommend looking into Independent Legal Advice between all co-borrowers.

Co-signing is NOT a life sentence Just because you need a co-signer to get a mortgage doesn’t mean that you will always need a co-signer.

In fact, as soon as you feel that you’re strong enough to qualify without your co-signer – you can ask your lender to reconsider your application and remove the co-signer from the title. It is a legal process so there will be a small cost associated with the process, but doing so will remove the co-signer from your loan (once you are able to qualify on your own), and release them from the responsibility of the mortgage.

Removing a co-signer technically counts as changing the mortgage, so you need to check with your mortgage broker and lender to ensure that the lender you choose doesn’t count removing a co-signer as breaking your mortgage, because there could be large penalties associated with doing so.

Co-signing is an option that could help a lot of people buy a home, especially first time home buyers who are typically starting their career and building their credit bureau.

A final mortgage tip: a couple of alternatives to co-signing that could help someone out:

• providing gift funds for a down payment
• paying off someone else’s debt, giving them more funds to pay the mortgage

Kelly Hudson

Dominion Lending Centres – Accredited Mortgage Professional

Why reverse mortgages are bucking the downward trend

The reverse mortgage market in Canada has been increasing at a phenomenal rate over the last few years.

In fact, for HomeEquity Bank, the provider of the CHIP Reverse Mortgage, growth was well over 40% in August, bringing Canada’s outstanding reverse mortgage balance to $3.03 billion.

Compare this to the latest growth in lending for new and renewal mortgages at just 4.1% – this is the lowest since May 2001. Much of this slow-down in mortgage growth is a result of the introduction of the new mortgage stress test, which has made it harder for borrowers to qualify for the mortgage they need, as well as a significant jump in mortgage interest rates.

So, how is it that reverse mortgages are growing so much faster than conventional mortgages? And who is driving this growth?

The reverse mortgage solution and why it matters to you

The CHIP Reverse Mortgages allows you to tap into the equity of your home is available to Canadians aged 55 and over. The key difference from a regular mortgage is that borrowers don’t have to make any regular repayments. This means they can have a considerable injection of cash without having to pay off what they owe until they sell or move out of their home.

The number of Canadians over 65 has jumped by 20% since 2011, so the potential market for reverse mortgages has grown enormously in just a few years.

Life expectancy is now at almost 83 and more people are living into their 90s and beyond 100 than ever before. Retirement can now easily last 20 years or more, which can put a big strain on retirement savings. Many retirees are therefore having to look at ways to supplement their retirement income.

There are many reasons for taking out a reverse mortgage. These include paying off high interest debt, maintaining a good standard of living, improving or retrofitting their home and helping family out financially.

Canadians prefer to stay in their homes during retirement

A recent Ipsos/HomeEquity Bank survey revealed that a staggering 93% of Canadians aged 65+ are determined to stay in their homes during retirement, rather than downsize or move in with relatives or into a care home.

Almost 70% said that maintaining their independence was the most important reason for staying at home. Others also want to stay close to their family, friends and community.

Downsizing is an increasingly unpopular option

While downsizing has often been seen as a key strategy for accessing some home equity, its popularity is declining. Another Ipsos survey revealed that 48% of homeowners don’t plan on downsizing and that 39% are skeptical that downsizing would actually save them any money. People who regretted downsizing said the key reasons were missing their old neighbourhood, family and friends, which can play a big role in emotional well-being in your later years.

Nevertheless, 31% of retirees say they need to cash in on their home’s equity to live comfortably in retirement. So, if they don’t want to downsize, what are their options?

How the reverse mortgage helps out retirees

The introduction of the mortgage stress test has made it even harder for retirees to qualify for the kind of mortgage they need to effectively improve their finances.

Even those that do qualify often struggle to make the monthly payments required from a conventional mortgage or line of credit. A reverse mortgage provides them with tax-free cash that enable retirees to live the retirement they want, with no negative impact on their monthly income. For many retirees, a reverse mortgage is the only option available to them that provides them with the finances they need without regular required payments.

If you would like to find out more about the CHIP Reverse Mortgage and how it could help improve your retirement finances, contact your Dominion Lending Centre mortgage professional.

Rebecca Burgum

HomeEquity Bank – Director, Referred and Product Marketing

The #1 Misconception About Mortgage Financing!

It is a reoccurring but common misconception that you will qualify for a mortgage in the future because you have qualified for a mortgage in the past.

This is not accurate!

Do. Not. Assume. Anything.

Even if your financial situation has remained the same or has improved, securing mortgage financing is more difficult now than it has in recent years.
The latest changes to mortgage qualification by the federal government has left Canadians qualifying 20-25% less. On top of that, guidelines that lenders would use in determining your suitability have been replaced with non-negotiable rules and declarations.

As mortgage professionals, we keep up to date with the latest trends going on in the mortgage world by understanding lender products and staying attentive to evolving changes.

From experience, we can tell you that having a plan is crucial to a successful mortgage application. Making assumptions about your qualification or just “winging it” is a recipe for disaster. Here are a few points on why a mortgage broker is a must for the first time home-buyer.

1. They have access to over 40 different lenders, not just one
2. They work for you, not for the lender
3. They will guide you through the application process
4. They save you valuable time by shopping for you
5. They pull your credit once — if you go to multiple banks, you will have multiple credit pulls

If you are thinking about buying a property, please feel free to contact a Dominion Lending Centres mortgage professional where we can help you devise a full-proof plan!

Chris Cabel

Dominion Lending Centres – Accredited Mortgage Professional

Canadian Home Sales Weakened Further in November

Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales dipped for the third consecutive month, down 2.3% from October to November and down a whopping 12.6% year-over-year. Transactions declined in just over half of all local markets, with lower activity in the Greater Toronto Area (GTA), the Greater Vancouver Area (GVA) and Hamilton-Burlington offsetting increased sales in Edmonton. Sales were down from year-ago levels in three-quarters of all local markets, including the Lower Mainland of British Columbia, Calgary, the GTA and Hamilton-Burlington.

These data suggest a double-digit national sales decline in 2018, falling to its lowest level in five years even though the economy is reaching full employment. Next year’s growth in sales and prices will likely be moderated by recent policy changes from different levels of government, in addition to upward pressure on interest rates.

Many had expected a rebound in sales in British Columbia, but so far it has not materialized. The rebound in sales in Ontario last summer has now run its course and activity in Alberta has edged lower. Housing transactions in Quebec, in contrast, were strong.

New Listings

The number of newly listed homes fell by 3.3% between October and November, with new supply declining in roughly 70% of all local markets.

With new listings having declined by more than sales in November, the national sales-to-new listings ratio tightened slightly to 54.8% compared to 54.2% in October. This measure of market balance has remained close to its long-term average of 53.4% since the beginning of 2018.

Based on a comparison of the sales-to-new listings ratio with the long-term average, about 60% of all local markets were in balanced market territory in November 2018. There were 5.4 months of inventory on a national basis at the end of November 2018. While this remains in line with its long-term average of 5.3 months, the number of months of inventory is well above its long-term average in the Prairie provinces as well as in Newfoundland & Labrador. By contrast, the measure is well below its long-term average in Ontario, New Brunswick and Prince Edward Island. In other provinces, sales and inventory are more balanced.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) was up 2.3% y/y in October 2018, down once again on a month-over-month basis.

Following a well-established pattern, condo apartment units posted the largest year-over-year price gains in November (+6%), followed by townhouse/row units (+4%). By comparison, one-storey single-family homes posted a modest increase (+0.4%) while two-storey single-family home prices held steady (+0.1%).

Trends continue to vary widely among the 17 housing markets tracked by the MLS® HPI. In British Columbia, home price gains have been steadily diminishing on a y/y basis in the Fraser Valley (+4.7%) and Victoria (+7.2%). By contrast, price gains picked up elsewhere on Vancouver Island (+12.6%) and, for the first time in five years, were down (-1.4%) from year-ago levels in the GVA. On a month-over-month basis, prices fell 1.9% in Greater Vancouver in November, the most since 2008, adding to the recent series of price declines in Canada’s most expensive housing market.

Among housing markets tracked by the index in the Greater Golden Horseshoe region, MLS® HPI benchmark home prices were up from year-ago levels in Guelph (+9.3%), the Niagara Region (+7.2%), Hamilton-Burlington (+6.3%), Oakville-Milton (+3.4%) and the GTA (+2.7%). Meanwhile, home prices in Barrie and District remain below year-ago levels (-2.1%).

Across the Prairies, benchmark home prices remained below year-ago levels in Calgary (-2.9%), Edmonton (-1.9%), Regina (-4%) and Saskatoon (-0.3%). Excess supply of listings relative to demand will continue to put downward pressure on prices until economic activity in the region strengthens.

In contrast, home prices rose 6.6% y/y in Ottawa (led by a 7.3% increase in two-storey single-family home prices), 6.2% in Greater Montreal (driven by a 9.4% increase in townhouse/row unit prices) and 4.2% in Greater Moncton (led by an 11.2% increase in townhouse/row unit prices). (Table 1)

The actual (not seasonally adjusted) national average price for homes sold in November 2018 was just over $488,000, down 2.9% from the same month last year.

Sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive markets, bias upward heavily skew the national average price. Excluding these two markets from calculations cuts almost $110,000 from the national average price, trimming it to just over $378,000.

Bottom Line

We are likely in store for a prolonged period of modest housing gains in the Greater Golden Horseshoe, stability or softening in British Columbia and further weakening in the Prairies, Alberta, and Newfoundland & Labrador.

The Canadian housing market has slowed considerably since mid-2017 and is ending the year on a quiet note. Two offsetting forces are impacting housing—strong population growth and rising rates. Sluggish sales and modestly rising prices nationally are likely in store for 2019. While there will still be some significant regional divergences, there is no need for further policy actions to affect demand.

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

House comes first! Thats your castle ….. I cant tell you how many consumers I have worked with who are in house mortgage foreclosure but when I review the credit report, their vehicle loan has never missed a payment. Ever. You want to  live in your truck people? Or your house.

What should come first, the house or the car?

So you just got a shiny new car, and now you want a shiny new home to go with it. Will that new car payment affect your mortgage pre- approval? The short answer… absolutely it will.
Recently, I have encountered many people looking to pre-approve for a home purchase that do not qualify. While it may be in part because of the mortgage “Stress Test” rules, a good portion is due to large debt obligations such as car loans. I have witnessed applicants that have brand new car loans/leases with huge payments and not one gave thought as to whether it would affect their ability to qualify for a mortgage.
Unless you have already done your home work with your mortgage broker by getting a mortgage pre-approval that factors the new car payment into it and your budget, you may be in for disappointment.
However, it doesn’t necessarily have to be one or the other. Here are some tips to get set for mortgage approval success.

1. Get pre-approved. Seek the guidance of your mortgage broker to know exactly what you qualify for before you start the house hunting process. Knowing what your maximum purchase price is, helps you and your realtor.
2. Be realistic with what you can afford. Start by looking at what you pay in rent now. That’s a good starting place to figure out what you can pay on a mortgage. However, you also must consider what you can get approved for.
3. Remember to save and budget for more than the mortgage payment. When you own a home, your monthly payment consists of more than just the mortgage payment. You will also pay property taxes, home owner insurance, and utilities on top of your other monthly debt obligations. Having emergency savings can help alleviate the stress of taking on the financial responsibility of a owning a home.
4. Clean up your credit. Paying off credit balances can not only help improve your credit score, it can also increase your buying power.
5. Avoid making big financial changes. This is the big one. Most lenders want to see that you’re a stable applicant. Doing things like buying a new car before you buy a new house does not establish you as stable. Similarly, opening new credit cards, or making a drastic change to your employment can also be detrimental to getting approved for a mortgage.

When in doubt always seek the advice of your Dominion Lending Centres mortgage professional.

Lynn Nequest

Dominion Lending Centres – Accredited Mortgage Professional

How to Get a FREE Copy of Your Credit Bureau

Think of your credit score as a report card on how you’ve handled your finances in the past. A credit score is a number that lenders use to determine the risk of lending money to a given borrower.

There is always someone willing to lend you money however, higher risk = higher rates!

Step 1 for good credit – you need to know your credit history
• In Canada there are 2 credit bureaus – Equifax and TransUnion.
• You can receive a FREE copy of your credit report from both Equifax Canada and TransUnion Canada once a year
• You can pay Equifax or TransUnion for a digital copy, which is much faster, BUT you have to pay, which sucks.

I recommend you order a copy of your credit report from both Equifax Canada and TransUnion Canada, since each credit bureau may have different information about how you have used credit in the past.

Ordering your own credit report has no effect on your credit score.
• Equifax Canada refers to your credit report as “credit file disclosure”.
• TransUnion Canada refers to your credit report as “consumer disclosure”.

Once you have obtained your free credit report, check it for errors:
• Are there any late payments that have been erroneously attributed to your credit history?
• Are the amounts owing in your credit report accurate?
• Is there anything missing on your credit bureau
o Sometimes the credit bureau has more that one file with your name, which can be merged, but it takes time.

If you find any errors on your credit report, you need to dispute them with your credit bureau.

How can I get a copy of my credit report and credit score?

There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check with both bureaus.

Credit scores run from 300 to 900. The higher the number, the greater the likelihood a request for credit will be approved.

The “free-report-by-mail” links are not prominently displayed, since credit bureaus would love to sell you instant access to your report and credit score online.

Equifax, the instructions to get a free credit report by mail are available here.

For TransUnion, the instructions to get a free credit report by mail are available here.

The bottom line: when it comes to financing your life, through credit cards, mortgages, car loans or any other kind of debt – your credit score has a BIG impact on what kind of terms you can negotiate.

Keeping an eye on your credit score is important — if there’s a problem or an error, you want to know and have time to fix it before you apply for a loan. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Kelly Hudson

Dominion Lending Centres – Accredited Mortgage Professional