Minimum Required Credit Profile

CoryVance • Jul 30, 2019

Credit. The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. When you borrow money to buy a house, you will be required to prove that you have a good history of managing your credit. But what exactly is a “good history of managing credit”? What are lenders looking at when they assess your credit report?

An easy way to remember the minimum requirements for credit is the 2/2/2 rule. 2 active trade lines for a minimum of 2 years, with a minimum of a $2000 limit.

Two active trade lines. You receive a trade line on your credit report anytime a lender extends you credit. This could be a credit card, an instalment loan, or a line of credit. Your repayment history is kept on your credit report. In order for a trade line to be considered active, you must use it at least once every three months.

Two years. Both your trade lines have to be established for at least two years. This gives the lender confidence that you have established your credit over a decent period of time.

Two thousand dollars. This is the bare minimum limit required on your trade lines. So if you have a credit card with a $1000 limit and a line of credit with a $2500 limit, you would be okay as your limit would be $3500. Sometimes people confuse the limit with the balance. You don’t have to carry a balance on your trade lines for them to be considered active. In fact, it’s best if you use your trade lines, but pay them off in full every month.

A great way to use your credit is to pay your bills via direct withdrawal from your credit card, then setup a regular transfer from your bank account to pay off the credit card in full. Automation becomes your best friend. Just make sure you check that everything is working as it should every once and awhile.

Now, although this all may seem pretty straightforward, there are a lot of situations where people assume they will qualify with a minimum required credit profile, when in fact they don’t. It could be a simple fix, or it could require a lot of time. So, if you are thinking about buying a house in the next couple of years, and want to make sure that your credit profile will be established by the time you are ready to shop, please contact me and we can work through your mortgage application.

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CORY VANCE

403-614-9211

cory@coryvance.ca

What You Need To Know About Online Mortgage Calculators

By Cory Vance • 23 Apr, 2024

You’d think an online calculator is a pretty straightforward device, one that you should be able to place your confidence in, and for the most part, they are. Calculators calculate numbers. The numbers are reliable, but how you interpret those numbers, not so much, especially if the goal is mortgage qualification. If you rely on the numbers from a “What can I afford” or “Mortgage Qualification” calculator without talking to an independent mortgage professional, you’re going to be misinformed. Don’t be fooled. Even though an online mortgage calculator can help you calculate mortgage payments or help you assess how additional payments would impact your amortization, they’ll never be able to give you an exact picture of what you can afford and how a lender will consider your mortgage application. While mortgage calculators are objective, mortgage lending isn’t. It’s 100% subjective. Lenders consider your financial situation, employment, credit history, assets, liabilities, the property you are looking to purchase. Then, they will compare that with whatever internal risk profile they are currently using to assess mortgage lending. Simply put, they don’t just look at the numbers. An online calculator is a great tool to help you run different financial scenarios and help assess your comfort level with different payment schedules and mortgage amounts. However, if you rely on an online calculator for mortgage qualification purposes, you’ll be disappointed. The first step in the mortgage qualification process is a preapproval. A preapproval will examine all the variables on your application, assess your financial situation, and provide you with a framework to buy a property based on your unique circumstance. Securing a preapproval comes at no cost to you and without any obligation to buy. It’ll simply allow you the freedom to move ahead with confidence, knowing exactly where you stand. Something a calculator is unable to do. Please connect anytime if you’d like to talk more about your financial situation and get a preapproval started. It would be a pleasure to work with you.

Understanding the Recent Housing Affordability Measures in Canada

By Cory Vance • 19 Apr, 2024

In recent years, housing affordability has become a significant concern for many Canadians, particularly for first-time homebuyers facing soaring prices and strict mortgage qualification criteria. To address these challenges, the Canadian government has introduced several housing affordability measures. In this blog post, we'll examine these measures and their potential implications for homebuyers. Increased Home Buyer's Plan (HBP) Withdrawal Limit Effective April 16, the Home Buyer's Plan (HBP) withdrawal limit will be raised from $35,000 to $60,000. The HBP allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) to use towards a down payment on a home. By increasing the withdrawal limit, the government aims to provide young Canadians with more flexibility in saving for their down payments, recognizing the growing challenges of entering the housing market. Extended Repayment Period for HBP Withdrawals In addition to increasing the withdrawal limit, the government has extended the repayment period for HBP withdrawals. Individuals who made withdrawals between January 1, 2022, and December 31, 2025, will now have five years instead of two to begin repayment. This extension provides borrowers with more time to manage their finances and repay the withdrawn amounts, alleviating some of the immediate financial pressures associated with using RRSP funds for a down payment. 30-Year Mortgage Amortizations for Newly Built Homes Starting August 1, 2024, first-time homebuyers purchasing newly built homes will be eligible for 30-year mortgage amortizations. This change extends the maximum mortgage repayment period from 25 years to 30 years, resulting in lower monthly mortgage payments. By offering longer amortization periods, the government aims to increase affordability and assist homebuyers in managing their housing expenses more effectively. Changes to the Canadian Mortgage Charter The government has also introduced changes to the Canadian Mortgage Charter to provide relief to homeowners facing financial challenges. These changes include early mortgage renewal notifications and permanent amortization relief for eligible homeowners. By implementing these measures, the government seeks to support homeowners in maintaining affordable mortgage payments and mitigating the risk of default during times of financial hardship. The recent housing affordability measures announced by the Canadian government are aimed at addressing the challenges faced by homebuyers in today's market. These measures include increasing withdrawal limits, extending repayment periods, and offering longer mortgage amortizations. The goal is to make homeownership more accessible and affordable for Canadians across the country. As these measures come into effect, it's crucial for homebuyers to stay informed about the changes and their implications. Consulting with a mortgage professional can help individuals explore their options and make informed decisions about their housing finances. If you're interested in learning more about these changes and how they may affect you, please don't hesitate to connect with us. We're here to walk you through the process and help you consider all your options and find the one that makes the most sense for you.