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What color is your credit score?

Nationwide Mortgage nonprime

Do you have a poor credit rating because of financial problems you have had in the past?

Perhaps you went through a bad divorce or you owned a small business that went bankrupt or a consumer proposal.

You might have lost your job and ended up defaulting on your loans and credit cards.

There are many circumstances that could have caused you to have poor credit.

This does not necessarily mean that obtaining a mortgage to purchase a home is out of the question and regardless of the circumstances speaking with a mortgage broker could help you with a course of action toward owning a home.

Does this mean your only option is a hard money loan?  What about non prime loans?  What are they and how can they help me?

Ensuring that you take the right steps whether you have bad credit or even no credit is very important. There may be some options available to you but they will come with a cost.

Here’s a guide to what we are going to take a look at to determine what options might be available for mortgage financing.

  • Check your credit score — You can do this yourself at either www.equifax.ca or www.transunion.ca or if you contact a mortgage broker, they can check it for free. Your credit score will be somewhere between 300 and 900. If you have a credit score below 600 most of the major bank lenders in Canada will not consider you for mortgage financing and you will be looking at an alternative mortgage lender. If you have gone through a bankruptcy or consumer proposal recently, the options available may include private lenders.
  • Save for a larger down payment — If you have good credit, then you can purchase a home with as little as a five per cent down payment, but with credit issues you need to be prepared to provide more equity. Lenders are going to require somewhere between 20-25 per cent down payment.
  • There will be fees — Be prepared to pay some fees to arrange a mortgage with either an alternative or private lender on top of the standard closing costs.
  • Rates — You will not qualify for the best rates that are currently being advertised, but if you make all of your payments on time and work on repairing your credit, then most likely you will qualify for better rates at renewal time.
  • Income and employment — A lender is going to review your history of employment and income to ensure that you are able to make your payments. Is your income confirmable? (Declared on your tax returns with your taxes paid up-to-date). This is particularly important for the self-employed applicant. Do you have employment stability?
  • Current debts — Carrying high balances on unsecured credit cards or having a high car payment could also affect a mortgage decision. Alternative lenders will want to ensure that you can afford your current obligations to prevent the potential of future default on a mortgage payment.
  • The property you are purchasing — This is a very important factor for private lenders lending to clients with bad credit. They will want to have a full appraisal completed on the property to ensure that it is marketable and worth the investment they are making in the mortgage.

There are options available

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5 Mistakes to Avoid Getting Rejected for a Mortgage

Amassing a big pile of cash for a down payment–to apply for a mortgage is a daunting task. First-time buyers often rightly pause as they begin to grasp the meaning of the phrase, “mortgaging your future.”

If you can get over that hurdle, you could be well on your way to the seven out of eight mortgage applications that get approved. A pessimist might observe that that means the application has a one-in-eight chance (12.5%) of being rejected.

True enough, but you can reduce the chance of rejection by avoiding a handful of mistakes that have a virtually immediate negative impact on your credit score. The experts at Realtor.com have come up with a list of five mistakes you can easily avoid to make sure that your application is one of the seven that gets approved and not the one that gets rejected.

1. Use your credit cards

One way to establish creditworthiness is to use the credit you have. That doesn’t mean to pile it on, but use the cards you have and pay them on-time to build up a credit history. If you really don’t want to do that, some lenders will look at your history of rent payments and other regular bills that you have.

2. Don’t open new credit cards near the time you are applying for a mortgage

According to Realtor.com, opening a new credit card account can cost you up to five points on your credit score. That may be enough to disqualify you for a mortgage. Also, don’t spend a lot of cash (or use credit on existing cards) before you get the mortgage and moved in.

3. Don’t miss a payment on a medical bill

If you’ve run up some big medical bills, work with the doctor or hospital to develop a payment plan you can live with. Defaulting on a medical bill typically results in the provider referring your account to a collection agency and the agency can refer your status to the credit reporting agencies.

4. Don’t change jobs

Most mortgage lenders want to see at least two years of consistent income before approving a loan. There are exceptions, of course, but sticking with the job you have until the mortgage is approved is a better choice if at all possible.

5. Don’t lie on the mortgage application

This should be obvious. In the first place, if you do stretch the truth, it can be prosecuted as mortgage fraud, a federal crime. Second, mortgage lenders do their homework and chances are you’ll get found out, and there goes the mortgage. While it might seem quaint these days, honesty is the best policy when it comes to getting a mortgage.

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3 Easy ways to improve your credit score.

Credit Score Tiers

Credit Score Tiers to Improve your Credit Score

Want to know how to improve your credit score? Most credit scores, including FICO scores, operate within the range of 300 to 850. The credit tiers generally look like this:

Flawless : 800 +
Excellent : 750 – 799
Good : 700-749
Fair: 650 – 699
Poor : 550 – 599
Terrible : 500 – 549
Wow : 499 and below

 

If you wish to improve your credit score and you are ready to refinance or purchase a property now then there are Non-Prime Loan Programs that can help you with that.  But regardless, here are three ways you can work towards building your credit score.

1. Pay your bills on time

Maybe this should go without saying.  But delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO Scores.   If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your FICO Scores should increase. Older credit problems count for less, so poor credit performance won’t haunt you forever.

Setting up an on-line bill paying system that can pay your minimum balance due, or ideally the whole balance if you can manage that.  Otherwise have a system of where you open your mail, where you put your bills, and when you pay them.

Late Payments and Collection Accounts

Be aware that late payments and paying off a collection account will not remove it from your credit report.  It will stay on your report for seven years. If you can’t make your payments on time contact your creditors or see a legitimate credit counselor.  This won’t rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time.

2.  Manage your Credit Balances

Keep balances low on credit cards and other “revolving credit”. High outstanding debt can affect a credit score.

Pay off debt rather than moving it around.

The most effective way to improve your credit scores in this area is by paying down your revolving (credit cards) debt. In fact, owing the same amount but having fewer open accounts may lower your scores.

  • Don’t close unused credit cards as a short-term strategy to raise your scores.
  • Don’t open a number of new credit cards that you don’t need, just to increase your available credit.  This approach could backfire and actually lower your credit scores.

3.  Make Sure Your Credit Report is Accurate to improve your credit score

Everyone has three credit reports, one from each of the 3 major credit bureaus: Experian, Equifax and TransUnion.  Since your credit scores are based on the data in your credit reports if you have a mistake on your credit report, your credit score will reflect that mistake.

You’re entitled to a free copy, once a year, of all three of your credit reports under the Fair Credit Reporting Act. These reports can be accessed via AnnualCreditReport.com, the government-mandated site run by the major bureaus.

Once you have your credit reports in hand, here’s a quick checklist of questions to ask yourself to help you spot potential errors:

  • Is all of your personal information accurate?
  • Are your credit accounts being reported?
  • Late or missed payments listed that you remember making on time?
  • Accounts or applications for credit you don’t recognize?
  • Items from decades ago still appearing on your report?

If you are considering Refinancing or Purchasing a home, then let’s start off with a quick inquiry that does not require you to share any sensitive information.

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