Here’s a typical scenario: You and your spouse are applying for a mortgage loan. You’ve had credit for years with three or four credit cards, a car loan and a line of credit. You always pay the minimum obligation, and always on time. Your spouse, on the other hand, doesn’t use much credit, perhaps has only two or three credit lines and has missed a payment or two in the past two years. The lender pulls your credit report and your spouse has a higher score than you. Here’s why that happens.
First of all, a credit report is a “snapshot” of you and your credit history. The report includes personal information, employment information, credit information, information about judgments and collections, as well as a list of companies that have requested a credit report. Your credit score is a number from 300 to 900, which the lender uses to determine your risk factor. For example, a score of 680 means 680 people out of 900 are likely to repay their debt.
So, how do the credit bureaus determine these scores? They use five factors.
To know more about credit scores and how to get your report, call me today.
There are times in our lives when the unexpected happens and we find it difficult to cope financially. It could be a job loss, an unexpected illness, the death of a loved one or separation and divorce. There may be enough money to get by for a few months, but soon families may find themselves overwhelmed as the bills start to mount and household finances begin to dwindle. Then households may start to miss payments to creditors, including a mortgage payment. While a one-time missed payment can easily be dealt with, long term problems may need a different approach. Consider the following:
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Before you take possession of your new abode, you need to consider any and all additional costs of obtaining your mortgage. We call these closing costs. Generally estimated around 1 – 1.5% of the price of the home, these are the unavoidable costs that are the last hurdle between you and glorious home ownership.
Due upon the acceptance of your purchase offer, a deposit is essentially a gesture of good faith between the buyer and the seller. A minimum deposit is usually around $5000.00. This is something your realtor will help you with.
Mortgage loan insurance
This is a mandatory expense for buyers who make a down payment of less than 20%. Administered through one of the three insurers we have in Canada; the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial or AIG, the cost of this insurance depends on the amount of your down payment and also certain details of your application. The premium ranges from between 0.5% all the way up to around 6% if you are self employed and putting only 5% down. This premium is charged on the amount of the mortgage and can be added on to the mortgage.
Real estate agents normally counsel buyers to make an offer on a home conditional on the outcome of an independent home inspection. A home inspector looks for items that could affect the price and desirability of a home, such as outdated wiring, shabby roofing, an elderly furnace or cracks in the foundation. The fee depends on the home’s size, age and the amount of time it takes to do a thorough inspection. Approximate cost $400-500.00.
Canadian law states that a home owner must have fire insurance on his or her new property effective when he or she takes possession. If the home inspection turned up antiquated wiring or other problematic features, a potential insurer may refuse to cover you unless you get it fixed. Rule of thumb: Factor in all costs required to pacify the insurance company.
A lawyer is vital to any home deal. He or she is responsible for research, handling documents, mediating with the seller’s attorney, transfer of land title and much more. Approximate cost $800-1300.00.
This protects you from any unpleasant revelations about your property’s history that might crop up in the future. Unless you pay for a survey, it’s difficult to ascertain a comprehensive history of your property. In order to deal with potential errors or omissions in the public registry or secret heirs to the land, most new homeowners buy title insurance. The fee depends on two factors. The first is whether the property is urban or rural; title insurance costs more out in the country because there’s a greater chance that the property may contain an undisclosed structure, such as a well or a septic tank. The second factor depends on whether it’s a single residence or a multiple-family dwelling (such as an apartment); the cost is more in the latter case. This is obtained through your lawyer and is approximately $200-250.00
Unless you take possession on the first of the month, you must prepay the amount of interest accrued up to the first day of the next month. This depends on what payment structure you have chosen (monthly, bi weekly, weekly, etc). That sum is due on your closing day or with your first payment, depending on the lender.
The seller may be entitled to a reimbursement, from you, if she has prepaid bills (water, gas or hydro) or property taxes.
Whether you’re hiring professional haulers or conscripting friends and family to lug boxes, you can expect an outlay of cash on moving day.
Service activation fees
Once you move into your new dwelling, you’ll inevitably have to pay activation fees for utilities such as phone, cable, gas and electricity.
Forwarding your mail
You’ve made a point of apprising the important people in your life — family, friends, employers, the bank, the utilities, your credit card company — of your new address. But you’re bound to forget someone. To ensure you don’t miss any crucial mail, you should get Canada Post to forward mail sent to your old address to your new residence. You can sign up for the service online or at any post office. The cost is about $30 for six months, but peace of mind is priceless.
An appraisal may be required to determine the market value of the property you are buying. If you are putting more than 20% down the appraisal is at your cost and they generally start at $350 and go up depending on the appraisal company, the size of the property and its location. For example, properties over 1800 square feet have a higher cost as well as acreages depending on the amount of land and where they are located.
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But now your credit score is lower and you want to move on with your life – maybe buy a house or get a new car. Don’t underestimate the power of your credit score. It not only reveals to a lender if you’re a good credit risk, it’s also the basis for the interest rate you’ll pay. In today’s credit world, if your score is low you can still get a loan for a car or a home, but it will cost you. Lenders may charge extra fees and will certainly charge you a higher interest rate. This is a costly proposition. However if you’re patient and persistent, you can improve your credit score in six to eight months. Here’s how:
Yesterday the B.C. Government released it's 2018 Budget and there were some notable changes. Here are some big ones from the 30-point plan...
For the housing measures, read here:
As always, if you have any questions or concerns, reach out!
Know your options.
When it comes to your mortgage there are many types of insurance available, some mandatory, some not. Let's dive in and see what it'll cost you and who it's protecting...
The mandatory one.
It's me again! I will be posting articles with more in depth information regarding specific mortgage scenarios. I do my best writing when my kids are asleep...