PEI Real Estate, Mortgages and You!
If you are looking into buying a PEI home and if you are looking at a site such as this that is devoted to helping people buy PEI real estate you probably are, you will, unless you have some $100K in cash have to qualify for a mortgage. Getting a mortgage to invest in PEI real estate depends mainly on 2 factors, your credit score (a number between 300 and 900) that shows lenders your creditworthiness and your income which shows lendors how much you would be able to pay.
Understanding your Credit Score
In order to be an informed consumer you must first know your credit score. You can obtain a free copy of your credit report from Transunion or Equifax but the free version will not supply your credit score. For that information you must pay. Typically this costs just over $20 and you can get the results on the internet at either credit agencies' website. If your credit score is low you will have a much harder time financing your PEI real estate purchase. You ideally want a credit score of 700 or better although some lenders will finance your PEI home purchase at credit scores over 600. In this case usually the interest rate on your PEI real estate will be higher. In either case potential PEI real estate lenders will look very closely at your credit worthiness as expressed in your credit score and at your income to see what amount of debt you could easily service as well as other factors such as length of employment, other debt etc.
Steps to building your Credit Score & your chance of a PEI real estate purchase!
Pay bills ontime - use online payment systems or setup automatic payments if necessary. Failure to pay bills on time will result in a reduced credit score and problems with financing a PEI real estate purchase.
Ensure that you have money onhand ie savings. Start a savings program to automatically save a certain amount from your paycheque. Having savings shows lenders a certain fiscal responsibility and will increse the likelihood of earlier PEI home ownership.
Make sure that rent is paid on time and that lease obligations are met. This shows that you are "of your word" and will honour contractual agreements that you have made. Failure to do so can result in a negative credit report and delay PEI home ownership.
Reduce your debt, especially credit cards. Credit cards at best reduce the amount of money you will have to spend on your PEI real estate purchase or it could outright delay it until paid down. Debt service for credit card debt is taken off the amount you qualify for based on income and therefore negatively effect your ability to become PEI home owners.
Credit Score holding back PEI home ownership?
If either you do not have enough money as a downpayment or you are considered a less than stellar risk for PEI real estate mortgage you may have to opt for an insured loan or a "bad credit" mortgage. In either case this means that as the risk is higher you will pay more interest to borrow to buy that PEI home. So you may have to work at repairing your credit or save some more for a downpayment or wait until you have worked at your present employment longer if you want to avoid paying a penalty in interest rate for your past life choices or circumstances.
You should in any case see a number of banks and discuss your situation as well as mortgage brokers. Sometimes a mortgage broker can get you PEI home financing when a bank can not. Mortgage brokers shop around a number of lenders on your behalf including banks, finance companies and even sometimes private mortgage lenders. There are sometimes up front fees for mortgages arranged by mortgage brokers. You should make sure you know what fees, if any, are being charged on the front-end of your PEI real estate purchase.
Another point to remember when shopping for your PEI real estate mortgage includes not making other large purchases before seeking a mortgage. Wait until after to apply for a new car loan or indeed any loan. You want to be as debt free as possible going in.
If you are planning a PEI real estate purchase in the near future and you have a checkered credit history or perhaps a lack of credit history, drop by and talk to Wally Ross, your PEI realtor and part of the Century21 PEI real estate team. He can help you set a path to PEI home ownership.