When purchasing a home, many factors are taken into consideration to ensure you can financially afford the home. One of these factors, which is at the top of the list, is your credit score. This is a three-digit number that ranges from 300 to 900 points. This number is an accumulation of your financial behaviours. It takes into consideration many factors such as your debt, how old your accounts are, the number of credit lines you have opened, and your number of missed payments.
When you purchase a home in Markham, your credit score is one of the first numbers that lenders will look at. Here are just a few reasons why this number is so important when applying for a mortgage and purchasing a home.
It Gives Lenders Confidence
Your credit score gives lenders a glimpse into your financial habits. When you have a low score, it is a strong indicator that you have established poor habits and paying off your mortgage or missing payments, etc., is much more likely. When you have a high score, lenders are more confident that you will not foreclose on a property and they are more likely to approve your loan.
It Affects Your Interest Rates
When financing a home, you will receive an interest rate. You want the lowest rate possible as that will save you significantly over the course of the loan. For example, even a 0.5% interest rate can save you thousands of dollars.
One factor to determine your interest rate is your credit number. If you have a low number, you can expect a higher interest rate. This protects the lender in case you miss payments or foreclose on the home. Higher credit numbers will help to lower your score, saving you money. This means that if you have a low credit score, it may be wise to build it before you purchase your dream house in Markham.
You Loan Options May Be Limited
Your credit score can play a role in the type of financing you receive. You may not qualify for certain loan types, incentives, etc., with a lower credit score. Keep in mind that most lenders require a minimum of 600 to 640 to be approved for any type of home loan in Canada.
It is important to note that your credit score is not the only factor that will determine whether you qualify for a home loan. Even with a low credit score, you may still be approved if you have a high-income job and little debt. You will want to work with a lender to determine your specific financial situation.
Once you are ready to purchase a home in Markham, contact real estate agent Martin MacFarlane. He can help you through the entire home-buying process and help you find a home you love within your budget.