Beyond income, credit, which ranges in a score from 500 to 900, plays a crucial role in lending decisions. Income can be high, however if credit has been negatively impacted in the near past – this can affect the qualification. All lowest rate mortgage lenders have minimum credit scores that they will accept, and if the mortgage is less than 20% down payment then the CMHC will impose minimum credit standards in a ‘gatekeeper’ fashion to all lenders.
This said, one of the key things to remember regarding credit, is that the score is always changing – and if there have been some mishaps in the past – these can be repaired relatively quickly with the right advice and decisive action.
Typically, a credit score (also known as a ‘Beacon Score’) of 650 or higher will be considered for approval by an ‘A’ lender that provides the low market rates. For the absolute best deals and discounts in the market, often a minimum credit score of 680 is needed.
Credit scores lower than 650 can certainly be approved for a mortgage, but the rate may be slightly higher. The closer to 500 a score gets, the higher the rate and down payment requirement. For low credit mortgages, often a 1 or 2 year mortgage can be approved as a short term solution, and after the 1 or 2 year recovery period, the lowest rates in the market can be applied for at that time.
If you have made your payments on time and had one or more credit lines for the past 3 years then your score will likely be high. If you are are unsure of your credit score – click here to go to Equifax Canada and discover your credit score.