So you’re a mortgage underwriter, and you have a pile of credit reports and scores to go through to find what credit score you need to get a mortgage? You might be surprised that one factor alone can determine the amount of money you can qualify for a mortgage. Lenders use your credit score as the basis for what type of loans you are eligible for and what interest rate, or risk, they will charge on the loan. The last thing you want is to get an excellent credit score and get a decline on your mortgage request. Here are some tips on what credit score you need to get a mortgage.
What credit score do you need to get a mortgage?
Your credit score is a number typically between 300 and 850. This number is calculated using a mathematical formula based on your history and the debts you have incurred. Late payments, delinquent accounts, credit card debt, and outstanding bills are all considered factors when calculating your credit score. A low credit score shows potential lenders that you may not be responsible for your finances, which could cause them to turn you down for loans. You have an excellent credit score if you have very few or no errors on your credit report. More information on the range of possible credit scores can be found here.
People with low credit scores often find themselves turned down for loans because of these problems. Ensuring prompt payment of your bills will improve your chances of success. Lenders use your credit score to determine how much credit you can support. The lower your credit score, the harder it will be to qualify for a mortgage. Remember that it is not just what credit score you need to get a mortgage; it is also what other factors the lender will consider. With no credit or bad credit, there may be different ways you can find the financing you need. In these situations, your downpayment amount will be significant. Lenders will look to reduce the potential risk by ensuring their investment is covered if you default on your loan, forcing a Power of Sale situation.
Credit Score and Bank Navigation Index
Generally speaking, a FICO score greater than 600 will potentially allow you access to the most competitive products and rates. However, this minimum score has risen to 680. At 680, with an established credit history, your credit score should not be an issue with mortgage lenders. The perfect FICO score is 900. With a 900, because of the elusive, you are known in the industry as a “unicorn.”
Recently, credit monitoring services have introduced a second risk indicator matrix to support the credit score rating. The Bankruptcy Navigator Index is a risk indicator of the potential of the applicant to go bankrupt. In addition to a solid FICO score, lenders will want a solid Bank Nav score as well, and this number is generally in the mid-900’s.
Can you buy a house with poor credit?
Many people are struggling to get mortgages and lines of credit these days. Can you buy a house with poor credit in Canada? In the past, getting approved for a mortgage or line of credit was a reasonably straightforward process. Today the lenders are tightening their lending requirements, and there is less room for risk. It would be best if you considered several things when trying to buy a home with low credit, starting with knowing your FICO score.
Your FICO score is a risk indicator of your creditworthiness as a borrower. Several factors are considered, including your payment history, the amount of debt you have and the type of established credit. The better your credit rating, the better your chance of getting approved. The lower your score, the worse your options will be of getting approved – even on a secured loan. The longer you have bad credit, the harder it will be for you to obtain new credit or financing for significant expenditures such as a new home or car.
Can you buy a house with bad credit in Canada? Suppose you can obtain an unsecured line of credit with a lender. In that case, you will find that it will be straightforward to make payments on time and to manage your credit appropriately. Taking advantage of financial counselling services can help you get the credit rating you need and improve your overall financial situation.
Can I get a mortgage without a credit check?
It is doubtful that a lender will not require a credit check before they approve your loan request. Depending on the lender, they will check with a credit check agency like Equifax or TransUnion before giving out a loan. What does this mean for someone with inadequate or no credit? They can still get their loan approved, but they will have to pay a higher interest rate. Another thing about this is that the lender will charge more because they will base their interest rate on a person’s credit score. They do this so they do not have to keep the money they would have given someone good credit. To understand more about a lender’s credit policy, check their website for more information.
If you’d like help or more information you can email us at info@TheMortgageGuyNiagara.com or book a no-obligation consultation.