When applying for a mortgage in Canada, the lender will pull your credit score to assess your financial health. They will also look at several other factors, such as your employment history, income, and debts. If your credit score is high, it can show the lender that you are a low-risk borrower, and they may be more likely to approve your mortgage and offer you lower interest rates. If your credit score is low, the lender may view you as a high-risk borrower, and you may be less likely to be approved for a mortgage or offered good rates.
Here, Ottawa Mortgage Services shares what you need to know regarding credit score requirements for mortgages in Canada:
What Credit Score Will Get You Approved for a Mortgage in Canada?
In Canada, credit scores range from 300 to 900. A score of 660 or higher is deemed good, meaning that the risk of defaulting on a mortgage is low, and the person is a safe candidate for a loan.
To be approved for a mortgage, you will need a credit score of at least 680. Some lenders may be willing to approve a lower score, but a higher score is always better. A credit score of 700 is optimal.
Factors That Impact Your Credit Score
Here are some of the factors that have an effect on your credit score:
- Payment History
- Credit Utilization
- Credit History
- New Credit Requests
- Types of Credit
How Does Your Credit Score Affect Mortgage Application?
Your credit score affects your mortgage in a few ways. First, it will determine the interest rate you qualify for. A higher score means you’re seen as a lower-risk borrower, leading to a lower interest rate on your loan.
A lower score could lead to a higher interest rate and could mean you won’t qualify for a loan at all. Many lenders prefer an applicant’s credit score of 680 or higher. But there are programs available for borrowers with lower scores.
Your credit score will also affect the size of your down payment. Lenders typically require a higher down payment from borrowers with lower credit scores.
Can One Get a Mortgage With a Bad Credit?
Everyone knows having poor credit can make it challenging to get a mortgage.
Lenders are typically unwilling to work with borrowers with poor credit histories, viewing them as higher risk. That said, it is still possible for someone to get a mortgage with bad credit. There are a number of specialized lenders who work with borrowers with less-than-perfect credit. These lenders are typically willing to take on more risk and, as such, may be more expensive than traditional lenders.
It’s important to note that getting a mortgage with bad credit will likely come with some challenges. For one, you may be required to make a larger down payment than you would with good credit. You may also be subject to higher interest rates and fees.
If you’re willing to work with a specialized lender and are prepared to make some compromises, getting a mortgage even with bad credit is possible.
Your credit score is one of the most important factors in getting approved for a mortgage in Canada. A high credit score shows you’re a low-risk borrower, one that is attractive to lenders. A low credit score could lead to a higher interest rate and could mean you’ll have to put down a larger down payment. So it’s certainly in your best interest to keep your credit score as high as possible. If you need more information on this, you can consult a mortgage specialist in Ottawa who can help you.
Ottawa Mortgage Services is a mortgage agent in Ottawa that can provide you with the assistance you need when you apply for a home loan. Get in touch with us to set up an appointment!