What Credit Score Will Qualify Me For a Mortgage in Canada?

Getting Mortgage with Low Credit Score to Buy Toronto Home

If you’re in the market to purchase a new home or planning to purchase a new home in the near future, it is important to have a good credit score. Lenders for your mortgage will utilize the score to determine whether you’re eligible for a mortgage. If you qualify, your credit score will also determine how much interest you pay.

It is important to note that many lenders have different requirements for eligibility; therefore, it is not a one size fits all answer. As a result, it is important to understand the process in which lenders use, so you can optimize your odds at being eligible for a mortgage.


Checking Your Credit Score

The industry standard utilized for most mortgage lenders is FICO scores. In Canada, most mortgage lenders will request a credit report from Equifax and/or TransUnion. They will look to see a credible history of borrowing and repaying debt from a variety of sources. Most lenders will look at your credit history over a 1-2 year period to discern whether you’re eligible for a mortgage. In some cases, mortgage lenders will pull reports from both credit bureaus, and utilize the lower of the two scores for all pricing/qualification purposes.

If you have co-borrower, such as a spouse,  it is important to note that the lender will typically take the lower of each borrower’s scores. In some cases, one borrower may have poor credit while one could qualify on their own. If this is the case, then it may be beneficial to qualify as an individual and keep them off the loan in order to receive better rates. Note: you can still add the other borrower to the title of the house.


What is Considered a Good Credit Score?

In most cases, a minimum credit score of 620 is required to qualify for a mortgage. It is recommended to aim for a 760+ credit score. This way you can qualify for the best terms and rates without the headache. A minimum credit score of 720 is ideal to avoid any negative price adjustments. Any score below 620 would be considered subprime. This means that you are looking at higher interest rates, as statistically you are considered a risky investment.


What if I Don’t Have Credit?

If you do not have credit or a solid credit history, it is important to start building it immediately. For instance, you can start by getting a credit card and using it for small purchases, then pay the bill in full. To accelerate this process, you can utilize two different cards with different due dates and pay each bill in full. Lenders look for other sources of debt repayment, such as a line of credit or personal loan.


Working With a Mortgage Broker to Find the Right Lender

There are many benefits to working with a mortgage broker when looking to purchase a new home. With access to a wide array of lenders and thorough knowledge of industry standards, a mortgage broker can help you find the best lender to meet your needs; whereas, applying through your bank, you must meet their strict requirements or else you will not qualify for a mortgage. Working with a mortgage broker means that you’ll find the right loan for you.

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