Shopping around to get the best interest rates you can may affect your credit score for mortgage applications.
Your credit score goes up or down depending on how careful your regular spending habits are. When credit card issuers or loan financing agencies make multiple enquiries to Equifax or other credit bureaus on your behalf, it goes on your credit score record.
Every time a lender contacts Equifax or TransUnion Canada, their enquiry is placed on your financial record. Even if you decide not to buy, regardless of how good your credit score may be, that enquiry can impact mortgage transactions.
Axess Law finalizes real estate purchases when you settle on a mortgage lender.
What a Credit Score for Mortgage Is
NSF (non-sufficient funds) cheques, car loans gone bad or even lagging utility bills can determine how lenders assess your ability to manage a mortgage. Past or current bankruptcies stay on your credit record for seven years in Ontario — up to 14 years if you become bankrupt again.
But so can shopping around for better rates. While looking around for a mortgage in 45 days or less is a single enquiry, making multiple car loan or credit card applications tells mortgage lenders you plan to take on more debt. That could impact mortgage decisions.
Borrow from your RRSP for a mortgage down payment.
So what is a credit score for mortgages? Your score is determined by Equifax and TransUnion based on your history of applying for and paying off debt. Regularly making payments on time can improve your score. Falling behind by 30 days or more can pull your score down. Even successful consumer proposals to reduce high debt loads are visible to lenders for up to three years.
What Happens With Poor Credit Scores
When you regularly fail to make payments on time, mortgage lenders will see you had difficulty managing your bills that month or simply forgot to go to the bank on time. To seriously change your credit score, you’ll need to:
- make payments before or on time
- only borrow what you can afford to repay
- increase income when debts go up
- check scores regularly to correct inaccuracies
- and avoid having delinquent debts overdue 120 days or more referred to collection agencies.
Can’t afford a mortgage? Here’s what to do.
Minimum Credit Score for Mortgage Applications (Ontario)
If you have a minimum 700 credit score for mortgages, you’re in good company. Nearly 88% of Canadian homeowners score about the same.
What to do if your credit score is poor? The minimum credit score for mortgage applications is 600 for CMHC (Canada Mortgage and Housing Corporation) and other mortgage default insurers. Below that range, trust companies or private lenders may advance a short-term or “bad credit” mortgage while you rebuild your credit rating.
Applying to private lenders for mortgages.
If you genuinely have no credit history because you have never borrowed money, are just starting out or are new to Canada, credit unions, private lenders and some banks may consider your application.
Genworth Minimum Credit Score
In reality, most high ratio lenders require a credit score for mortgage applications of 600 or more. Genworth minimum credit score requirements are no different than CMHC or Canada Guaranty, Ontario’s other high ratio mortgage insurers. (Genworth is now Sagen MI Canada.)
New rules for mortgage stress tests.
Mortgage default insurance protects lenders when you have the minimum down payment (5% to 15%) to purchase a home. Your mortgage loan is insured against the possibility you may be unable to continue the mortgage payments if you lose your job or honour the full amount owing if your home is worth less than you owe when you sell.
You may still get private mortgages with a credit score under 600 — or no credit history at all — but Sagen Canada mortgage credit score minimums require at least that threshold.
Checking Your Credit Score
Go to Equifax and TransCanada Union to check your score online or use a free service like Credit Karma, MOGO or Borrowell. Some major banks also provide a free monthly credit report. Ask at yours.
When you disagree with a credit report, work with your lender to correct it. You can dispute credit bureau information directly by sending a demand letter requesting errors be removed. It’s your right under Canada’s Fair Credit Reporting Act.
Use a notary public to write a demand letter.
Why You Need a Lawyer
Before you make an offer to purchase legally binding, have an Axess Law real estate lawyer review your agreement of purchase and sale. We add clauses that protect your right to a home inspection or final walk-through before you take possession.
Take care wording home inspection clauses.
Buying or selling, our real estate lawyers (Ontario) can search property titles to register your new home with a local land titles office. We liaise with your realtor and mortgage lender to receive documents necessary to finalize real estate transactions by closing deadlines. Your deposit is held in trust until all your legal documents are in order.
Axess Law negotiates with the seller’s or buyer’s real estate agent to amend the agreement of purchase and sale if getting a mortgage loan is taking longer than you expect. Whether you have a CMHC high ratio mortgage or conventional financing, we discharge your existing mortgage and arrange for new mortgage documents to be signed and conveyed to your bank or private lender.
When construction liens get in the way of a purchase or sale, Axess Law’s real estate lawyers in Toronto, Greater Toronto Area or Ottawa act quickly to resolve disputes that could delay or prevent your real estate deal from closing. Ask us if you have questions like what is title insurance and what happens to real estate deposits.
See 25 questions you ask our real estate lawyers.
Legal Savings You Can Appreciate
Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
Book Online or By Phone
An Axess Law real estate closing lawyer can close your new home transaction anywhere in Ontario. Arrange in person appointments at Axess Law locations in Ottawa or Greater Toronto Area. We have onsite parking and easy transit access.
Our virtual real estate lawyers are available by remote video call anywhere you are. Make appointments from home or office with the confidence your video conference call is secure and confidential.