Summary of CMHC Underwriting Criteria Changes
1. Enforcing Gross/Total Debt Servicing (GDS/TDS) ratios of 35%/42%.
CMHC previously approved loans with ratios up to 39%/44% for borrowers with high credit scores and more reliable income.
CMHC-insured loans with a GDS above 35% represent an average of 18% of transactional new insurance written.
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2. Establishing a minimum credit score of 680 for at least one borrower.
The previous CMHC standard was a minimum 600 credit score.
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3. Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes.
In 2019, non-traditional sources of down payment applications were less than 2% of all CMHC’s homeowner transactional approved loans with a loan to value above 90%.
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At this time, it is not determined whether Canada Guaranty and Genworth will follow suit with these guideline changes….
Say you get a mortgage with a five year term and a rate under 3% (as they are currently). What will happen in five years when you renew your mortgage? What will the rate be then?
Economists estimate that the interest rate will rise in five years up to as much as 5.5%. This means from one month to the next, at renewal time, you’ll experience what is called payment shock. This can be difficult on you and your family.
We at the Welch & Co. Team recommend adjusting your payments every year to match the current interest rate (keep in mind we offer free annual reviews!). The increased payments go directly towards your principal (thus actually paying down the mortgage) and will help you avoid payment shock.
This is also why the government, in 2018, introduced a stress test where you now have to actually qualify as if your rate was 5.19% (the Bank of Canada posted rate). This measure was taken in order to avoid potential future defaults on mortgages.
For example:
You get a mortgage loan of $250,000.00 at a fixed rate of 2.89% over five years (25 year amortization). This represents a monthly payment of $1,169.05 (excluding taxes). In five years, if economists are correct in their predictions, the same mortgage will cost you $1,525.98 a month. This represents a payment shock of $356.93!
However, after visiting the Welch & Co. Team for your free annual review, you’ve decided to increase your payment to match the payment associated with the 5-year fixed rate. In addition to preventing payment shock, you also benefit from a lower amortization and will save thousands of dollars in interest. Say you increased this same payment by only $40.95, your new amortization would be 23 years and 10 months and you would save $4,938.41 in interest!
Call us today to find out how you can utilize this strategy and see for yourself how you can avoid payment shock, reduce your amortization and save money, all at once!
Why do pre-approvals have such a bad rep? Realtors will often ask their clients if they are pre-approved, in order to ensure that they are not wasting their time showing the client properties for which the clients cannot qualify or cannot afford. But what, in fact, is a client getting, when they are pre-approved?
We at the Welch & Co Team, believe that pre-approvals are not worth the paper they are written on….
Here are some of the many reasons why we feel this way:
1) most pre-approvals are automated, which means that no underwriter is viewing the application: few and far between are the applications that are “vanilla” anymore, meaning employment as full time permanent salaried positions, with high end credit scores. All applications should be reviewed and underwritten in order for any pre-approval to be value.
2) if the application is for a purchase with < 20% down payment, the deal needs to be underwritten by both the lender and the insurer: even underwritten pre-approvals are not sent to the insurer for review.
3) pre-approvals do not taken into consideration the property, and a key part of the underwriting process includes the review of the property
4) most banks do not review documentation prior to issuing a pre-approval, which often leads to incorrect amounts in terms of capacity for the client (i.e. client says they make $50k per annum but are paid hourly – this means that a 2 year average has to be factored in and the 2 year average is in actuality $44k – hence their capacity to purchase would decrease substantially).
5) approximately 95% of pre-approvals do not reflect the lowest or best interest rate in the market place – rates can go up or down. Furthermore, not all lenders offer pre-approvals, and as such the client’s application may not even end up with the same lender with whom they were pre-approved!
6) not all of a client’s needs or goals are factored in when a pre-approval is issued.
What do we recommend INSTEAD of a pre-approval? At the Welch & Co Team, you will get full underwriting up front, of your application and documentation. If there are any issues that might affect your financing, you will know about them as well as the reason that they might be an issue. Each and every file gets our individual attention and is underwritten in order to ensure that there are no surprises! This is is also why we need all of your paperwork BEFORE we send in your application! Call us at 613-546-2989 to book your appointment today. We are ….More than a dotted line….
Article retrieved from Verico: The Mortgage Professionals, posted on November 30th 2017.
Mortgage rates and rules are continuously changing, and mortgage financing is therefore becoming more complicated. What was easily approved just a year ago may not be today. There is no better time to use a Mortgage Broker and benefit from our expertise and reputation to get the best deal for you. We search over 25 lenders promotions and products to get you the best rate, terms and options for your situation. Get in touch with us today to speak to one of our experienced agents.
A Mortgage Broker works for YOU, not the lender, and provides you with a choice of lenders, rates and products. Choosing the wrong mortgage can end up costing you thousands of extra dollars in penalties, fees and interest. Let us do the work and find you the best product for your specific situation.
We are relationship-focused, not transactional. Our brokers have been with The Mortgage Professionals an average of 10 years! That means that when you call us / text us / email us YOUR broker is available to answer your questions, not a 1-800 number and not someone who has never met you or who has just joined the bank. Many of our clients have dealt with us for more than 20 years, and some we are dealing with their children and even grandchildren!
Setting up multiple bank meetings during work hours could take you weeks to accomplish, and if you are not knowledgeable about mortgage terms and comfortable negotiating rates, you may not get the best term and rate to suit your needs. Let our seasoned mortgage brokers do the work for you and save you time and money.
Mortgage Brokers are focused on mortgages – not on trying to sell you 15+ other different banking products. Our focus is on researching almost 30 lenders’ products, special offers, and fine print so that we can ensure you get a mortgage that you understand, with no hidden fees or shocking penalties.
Are you looking to buy a future investment property? Do you have children approaching university? Want to finish your basement as a rental suite? Going back to school? Mortgage brokers tailor your mortgage to your long-term and short-term financial goals, taking into account mortgage products that maximize your financial savings and flexibility.
There is absolutely no charge for our expert advice and service on typical residential mortgages. We are paid a finders fee directly from the lender and not by the person using the services of our Mortgage Brokers.
We are here to answer any questions after your mortgage has been funded. Credit issues? Increased debt-load? You can expect our Mortgage Brokers to review your mortgage and finances regularly during your term to ensure your mortgage is still the right product for you and still competitive. At renewal time we will shop your mortgage again to ensure you are still getting the best offer at renewal – can you expect the same from your bank?
Article retrieved from Verico: The Mortgage Professionals, posted March 28th 2018.
The What
An appraisal is used to determine whether a home’s sale price or estimated value is appropriate given the home’s condition, location, and features. The appraisal helps the bank protect itself against lending more than it might be able to recover in the case of default or foreclosure.
Most lenders have an approved list of vetted appraisers which must be used for the appraisal. Typically, an appraisal costs between $350 – $550.
The Why
Before requesting an appraisal, many lenders (and mortgage insurers) use automated evaluation tools, accessing market data (real estate sales data, MPAC assessments, etc..) to determine whether the value is accurate. However in some cases an appraisal is still required.
In a purchase, an appraisal might be requested under the following conditions:
- Private sale (e.g. not using a Realtor, ComFree, Property Guys, etc.)
- Using the same realtor for the purchase as for the sale
- Bank / Foreclosure sale
- The value of the house is significantly different that the surrounding homes
In the case where borrowers switch to another lender without adding money to the mortgage, typically an appraisal is not required.
With a refinance (e.g. where the borrower wants to add money to their existing mortgage), the lender in almost all cases will require an appraisal.
Who Pays
In a mortgage-insured purchase (where the borrower is putting less than 20% downpayment), if an appraisal is required, the insurer will typically pay.
If an appraisal is required for a purchase with more than 20% downpayment or a refinance, some lenders will cover the cost. However in some cases, the borrower will have to pay for the appraisal.
In a refinance, typically the borrower pays. However we do have access to lenders and special products where the appraisal is paid for.
How we can help
As Mortgage Agents & Brokers, we get as much information and documentation upfront about the borrower and the property to minimize the potential that an appraisal will be required. We also review all closing costs for purchases and refinances with clients to ensure that there are no surprise costs. Speak to one of our agents today about your purchase, refinance or renewal to find out your options!
Article written by Robert McLister, published December 5th, retrieved from The Globe and Mail.
Many people started out Wednesday morning expecting three or more rate hikes in the next 18 months.
Now, they’re wondering if we’ll see more than one.
That’s how much rate expectations have changed since the Bank of Canada’s latest rate statement.
If you’re shopping for a mortgage and believe what the bond market is telling us, it implies your odds of success with a fixed rate may have just changed.
WATCH THE BOC’S ACTIONS, NOT ITS LIPS
The Bank of Canada still maintains that its key bank rate is headed toward its estimated “neutral range,” which means 75 to 175 basis points higher than today’s 1.75 per cent (75 basis points equals three-quarters of a percentage point).
But the bond market, which bakes in virtually all available information, is losing faith in the bank’s words. The market is focused on the facts: economic growth stalled this quarter, Canadians’ savings rate is near all-time lows, the economically critical oil sector is near crisis mode, trade war threats persist, the all-important housing sector is slowing, consumer spending is dropping, business investment is falling, the stock market is diving, and now even the U.S. Federal Reserve is chirping dovish.
That’s why Canada’s five-year bond yield, which guides five-year fixed mortgage rates, has fallen out of bed – dropping all the way down to its one-year midpoint.
All of this is inconsistent with a “rising rates” narrative.
WHERE TO NOW
First off, variable rates are going nowhere fast. Now, the market is not expecting the next rate hike until spring. There is almost more risk of lenders reducing variable-rate discounts due to credit, risk or margin concerns than due to Bank of Canada rate hikes. (If any of that happened, it would directly impact new variable-rate borrowers, not existing ones.)
As for five-year fixed rates, banks are doing what banks do: maintaining elevated profit margins for as long as they can. In a typical market, with bond yields down 40 basis points (bps) in less than a month, five-year fixed rates would’ve dropped by now, but they haven’t.
Previous rate hikes and tighter mortgage rules have shrunk the prime mortgage market. Intense competition for this smaller pie has led to skimpier mortgage revenue all year. Now the banks want their profit margins back.
If you want to get technical, consider mortgage “spreads,” the difference between banks’ going rates and the government’s five-year bond yield. Many big lenders have been settling for just 130-140 bps for most of this year. Normally they like to make 150-plus bps.
On top of this, if we really are nearing the end of the economic cycle, as the yield curve suggests, banks will want to price in a little extra margin for market risk and credit risk. And, let’s not forget, banks are facing stricter capital rules and higher deposit rates, which also affect their funding costs.
As we approach the winter doldrums, the slowest time of year for mortgages, banks figure that slashing rates now would barely move the needle on their mortgage market share, so why give up margin for no reason?
WHERE THE DEALS ARE
After today, more people are going to like their chances with floating rates (variable- and adjustable-rate mortgages). The best variable mortgage rates for well-qualified borrowers are currently:
2.80 per cent or less, if the mortgage is default insured
3.04 per cent if you’re refinancing
A rate near or under 3 per cent gives you at least a three-rate-hike head start over conventional five-year fixed rates. In the weeks to come, expect fewer borrowers to bet on the “over” (four-plus hikes), so variable-rate popularity will rise.
By the way, last quarter saw the highest percentage of insured borrowers going variable since Canada Mortgage and Housing Corp. started regularly publishing such stats. So, it has already started. People are becoming more educated every day about the risk/reward of variables and their other benefits, such as penalties that are drastically lower than those on big bank five-year fixed mortgages.
In short, floating-rate mortgages (which you can get with a fixed payment for peace of mind) are once again the value du jour for financially stable, risk-tolerant borrowers, despite Bank of Canada rate-speak.
The Bank of Canada has increased the overnight rate by a quarter point, as of yesterday’s meeting.
What does this mean to you if you have a variable rate mortgage?
It means that the Bank of Canada Prime rate, which most lenders adopt as their Prime rate, has increased from 3.45% to 3.70%. With 5 year terms offering anywhere from Prime -.75 % (currently 2.95%) to Prime minus 1.00% (currently 2.70%) this still represents a far wiser option than the fixed rate mortgages for a 5 year term. This video is fantastic in explaining the risks/ benefits of taking a variable rate versus a fixed rate mortgage.
If you have a variable rate mortgage, or are considering one: YOU SHOULD WATCH THIS!
Image retrieved from Yahoo Canada.
One of our 40 lenders has rebranded due to their desire to resonate more with the Canadian public:
With no change on the Bank of Canada prime rate, and very attractive spreads on variable rate offers (on high ratio purchases as low as Prime minus 1.05% – 3.45%-1.05% = 2.40%), it may be time to consider your first variable rate mortgage if you have not done so in the past!
Key information to consid
er:
- Bank of Canada (BOC) meets 8 x per year…
- Of those 8 meetings, the BOC normally will make changes to the overnight rate, which affects the prime rate, maximum 4 times…
- When the BOC makes increases on the prime rate, it normally is less than .25% at a time….
- The Welch & Co Team uses lenders that offer a FREE CONVERSION option at anytime throughout the term, which permits you to lock in the rate….
- The Welch & Co Team uses lenders that charge ONLY a 3 month interest penalty if you choose to break the term early…
- Historical data has proven statistically that variable rate mortgages always outperform fixed rate mortgages!
- Mitigate the risk and pay off your mortgage far faster by setting your payment as if you have a 5 year fixed rate!
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Let’s pretend you are purchasing a home for $315,000.00 with a down payment of approximately 10%.
This would leave you with a total loan amount of $290,000.00
Mortgage term 5 year fixed rate 5 year variable rate
Mortgage rate 3.44% Prime – 1.05% = 2.40%
Monthly payment $ 1,438.72 $ 1,284.70
** Increase your payment by $ 154.02 to make it the same as the fixed rate. **
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Interest Paid in 5 years $ 46,259.37 $ 31,472.20
With this strategy you are saving $ 14,787.17 in interest over your five year term and reducing your amortization dramatically!
Call us today to further discuss a variable rate mortgage option!
613-546-2989.
https://www.bankofcanada.ca/2018/05/fad-press-release-2018-05-30/
Lenders normally have until Monday, following announcements made by the Bank of Canada on a Wednesday, in order to implement the changes. The announcement for an increased Bank of Canada Qualifying rate was made yesterday – an increase from 5.14% to 5.34%.
This applies to all borrowers that have less than a 20% down payment for their home purchase…
Call us at 613-546-2989 should you have any questions at all!!!!
https://www.thestar.com/business/2018/05/09/bank-of-canada-raises-mortgage-qualifying-rate-following-increase-in-big-six-banks-fixed-rates.html
Borrowed Down Payment Program
Did you know that it is still possible to borrow your down payment for your mortgage?!
Many folks think that this product is no longer available, however it is indeed! It is often misconstrued with another product: the 100% Financing Product, which is no longer available.
The key to the Borrowed Down Payment Product is that the lender must include the funds that were borrowed as a liability, as part of your application.
For instance:
You borrow $12,500.00 towards your purchase of a $250,000.00
home purchase. The loan amount of $12,500.00 must be part of the
liabilities on your application: if revolving credit then you must input
a repayment amount of 3% of the $12,500 therefore $375 per month.
Although details vary from one lender to another, it may well be worth your while to inquire with the Welch & Co Team about this product! The most important items in order to qualify for this product are to have good credit, and to have room to add the additional debt to your list of existing debts!
Key Features of the Product:
Property related
- 5-10% of the purchase price can be borrowed.
- High ratio insurance premium is slightly higher at 4.5%.
- >$75,000 <$500,000 purchase price
- 1-2 unit homes maximum.
Purchaser related
- No previous bankruptcies or consumer proposals.
- Credit profile strong (>650 minimum).
- Must have minimum two active trades for minimum two years.
- Source of borrowed funds can be personal loans, lines of credit, credit cards, gifts from non-immediate family members.
- Non-residing co-borrowers okay but no guarantors permitted.
- Ratios of income to debt same as normal.
- Borrower must be able to show that they have the ability to cover at a minimum the closing costs (1.5% of the purchase price)
Call us today to see if you might qualify for the Borrowed Down Payment Product at 613-546-2989!
If you currently have a variable rate mortgage:
Variable rate mortgages are normally sold in 3 or 5 year terms – the standard for 5 year terms over the last 5 years have been offered at Prime minus a certain percentage.
Example of what the rate increase represents for you:
For instance, if you have a mortgage at a rate of prime minus .50%.
Your rate yesterday would have been 3.20% – .50% = 2.70%.
Your rate today would be 3.45% – .50% = 2.95%.
Does this mean that it is time to convert to a fixed rate?!?
Historically speaking, variable rate mortgages have always outperformed fixed rate mortgages, so from this perspective, the answer is: “No”.
Furthermore, converting to a fixed rate would entail a mortgage rate of approximately 3.49-3.59%, this means that the answer is still : “No”. Your variable rate mortgage remains much lower than a fixed rate, and theoretically could handle another two quarter percent rate hikes before reaching that rate.
The Ultimate Deciding Factor:
If you cannot sleep at night because you are worrying about the possibility of the prime rate increasing again
and thereby affecting your mortgage rate / payment:
you should convert to a fixed rate!
N.B. One error in this article to be noted: TD Bank has set its prime rate at 3.60% rather than 3.45%.
Unfortunately, none of us has crystal ball in order to determine what the future holds… or in this case, whether or not the Bank of Canada will raise it’s overnight rate (which in turn will increase the Bank of Canada prime rate).
There has been much media rumbling about the possibility, on July 12, 2017, of the Bank of Canada increasing their overnight target rate.
The last two changes that the Bank of Canada made were both reductions in the overnight rate, so it has been a very long time since any increases have been made to the prime rate. (the exception being that TDCT Bank increased their prime rate to 2.85% from 2.70% last quarter of 2016).
Let’s remember the ABC’s or the basics when it comes to variable rates:
i) The Bank of Canada meets eight times per annum, usually only four of these meetings will reflect changes to the overnight lending rate
ii) When the Bank of Canada does indeed increase it’s overnight lending rate, it is usually to a maximum of .25%
iii) Historically speaking, the variable rate has ALWAYS outperformed the fixed rates
iv) The lenders that we use for our variable clients all have the right to conversion to a fixed rate at no cost to the client
v) The last two changes to the overnight target rate have been decreases and have therefore meant a decrease in the Bank Prime rate and thus additional savings for our variable rate clients.
Furthermore, all five year fixed rates have increased of late – going anywhere between 2.64%-2.99%.
Our variable rate clients have benefited from rates of anywhere between prime minus .70 (currently 2.00%) to prime minus .35% (currently 2.35%) which are both far better than what is currently being offered on the fixed rate front.
Rather than locking/ converting into a fixed rate, have you considered the possibility of maintaining your current variable rate, but increasing your payment?
One of our suggestions, during our free annual reviews offered to clients, and no matter what kind of rate you have (fixed or variable), is to increase your payments in order to reflect whatever the current 5 year fixed rate is being offered by lenders.
Let’s take the example of a $300,000.00 mortgage with a 25 year amortization and a prime minus .65% (currently 2.05% rate). Your monthly payments would be at a minimum $1,277.60. In order to match a 2.99% rate, your payment would need to be $ 1,418.20 ($140.60 extra).
By applying our strategy, you would save over $10,251.91 in interest and would shave off 3 years on your amortization!
This, rather than locking in to a fixed rate, would be our recommendation with the current rumblings of the Bank of Canada increasing it’s rates!
General Information – Factors that Affect: Variable Mortgage Rates
The Bank of Canada is responsible for changes to variable mortgage rates because they determine the target overnight lending rate.
Variable Mortgage Rate: fluctuate monthly and is based on the mortgage lender’s prime rate.
Variable Rates and the Overnight Rate
The overnight rate changes the cost of lending/borrowing short-term funds and therefore influences the Prime Rate. Since variable mortgage rates are linked to prime rates, when prime rates go up, so will your variable mortgage rate and monthly payments.
Overnight Rate: the interest rate which large banks borrow and lend one-day funds amongst themselves. It is also known as the key interest rate, or the key policy rate.
Prime +/-
Variable mortgage rates are advertised as Prime plus or minus X%, for example Prime –0.60%, which means that the interest rate you pay is directly related to the Prime Rate, and will fluctuate whenever this changes. Link to Prime Rates page for all of the banks.
Example
Let’s say the current overnight rate is 0.5% and the major banks prime rate is 2.50%, and at that time the variable mortgage rate is – 0.50% (thus 2.00%).
If the Bank of Canada increases the overnight rate from 0.5% to 0.75% (an increase of 0.25%), the banks will likely follow suit and increase their prime rate by the same 0.25% to 2.75%. Your variable mortgage rate will thus also change due to this increase in the prime rate, making your new variable mortgage rate 2.75% – 0.50% = 2.25%.
How Much Does a Change in Prime Effect my Mortgage?
To put this in perspective, let’s use the above rate change example on a $250,000 mortgage amortized over 25 years. An increase of 0.5% would result in your monthly payments increasing by $30.40/month. Although this is not a massive increase, you can imagine the effects if rates increase by 2 or 3%.
Various changes have been made once again by the Minister of Finance regarding the Canadian mortgage industry…this article highlights these upcoming changes….
Aside from the emotions involved with a separation, there are several things to consider and act upon relative to your current mortgage.
Now that your separation agreement has been finalized, some action likely needs to be taken. The main questions that need to be addressed are:
- if you will be buying a new property
- staying in the existing one
In the event of a new Purchase, here are a few areas to consider:
Submitted 05/12/2015
I had a dream, and Raquel Welch of Mortgage Professionals helped make it come true.
Please allow me to share my story.
I am a young mother of two and my husband and I dreamed of owning our own home. No more landlords! We started saving for a down payment. Once we had a little nest built up, we paid a visit to our institutional banker. They politely turned us down because my husband had no credit. In the mortgage world this is worse than having bad credit. We asked if they could establish his credit. Funny, banks will not give you credit if you don’t have credit.
A friend recommended Raquel Welch at Mortgage Professionals. We needed to find out how we could accomplish our goal of owning our own home. Firstly, she was quick to establish credit for my husband. She spoke and guided us in a clear and easy manner. Once all the number crunching was done and documentation varified, Raquel was able to find a lender willing to take a chance on a young couple like us. It was an exciting moment when she told us we could start shopping.
We are now the proud owners of our first home. We are settled in and have even completed some renovations. We could not have done this without the professional help of Raquel. We are so grateful for her professionalism and expertise. We would not hesitate to recommend Raquel to new or experienced home buyers. She will find the best product for you and give you as much help as you need along the way. She is a superstar!
- How long does it take to rebuild my credit?
Credit can’t be rebuilt overnight, but it can be rebuilt. That’s why it’s best to start as soon as possible. Like a fine wine, a carefully aged, 50-year-old bottle of wine will likely taste much better than a 1-month-old bottle straight off of store shelves. The process of rebuilding your credit is much the same. While the steps you take to rebuild your credit can begin making some impact to your credit fairly quickly, time is the most important ingredient. The actual amount of time varies from person to person, depending on their situation and how poor their credit is. If you follow a sound credit rebuilding plan, you should expect to see significant improvements to your credit within approximately one year, and excellent progress after two to three years. Nevertheless, it is important to remember that you don’t need perfect credit to get car loans, mortgages, credit cards, or other forms of credit – but the better your credit, the easier it will be (and the less it will cost you).
- How soon should I begin rebuilding my credit after bankruptcy?
It’s a common misconception in Canada that you can’t obtain a loan until you are discharged from bankruptcy. If you have declared bankruptcy, your only legal requirement is that you must disclose to a potential lender or creditor that you are undischarged from bankruptcy – it’s up to the lender to decide if they are willing to give you the loan. This means that you can start rebuilding your credit the day after you file for bankruptcy, and since rebuilding takes time, that’s not a bad idea! Depending on your financial state, and short-term goals, the sooner you begin the process of rebuilding, the better off you’ll be in the long run.
- Do payday loans help rebuild my credit?
Payday loans do not report to your credit report due to the short term nature of the loan, so it is impossible for a payday loan to help you rebuild your credit. Whenever you are looking to rebuild your credit, it’s absolutely critical that the lender who gives you a loan reports your monthly payments to credit monitoring agencies.
- How much credit should I get in order to rebuild my credit rating?
While having some credit amount reporting to credit monitoring agencies is better than nothing, the amount will impact lender’ decisions to give you financing for things like a mortgage, a car loan, or a business loan. For example, if you only have a $500 secured credit card reporting to your credit, and you apply for a $500,000 mortgage, the creditor will not look favourably on your situation because you don’t have a history of being able to manage a significant amount of debt. While the definition of “significant amount of debt” will vary from lender to lender, it is typically agreed that a loan or credit card with a starting balance or limit of at least $1500-$2000 is necessary to make a significant difference. If you have previously filed for bankruptcy, some mortgage lenders require a minimum of $5000 in re-established credit on your credit report before you’ll be considered for financing.
- Is a secured credit card the only form of credit I can obtain to start rebuilding?
No. A secured credit card, sometimes called “revolving credit”, will help if you don’t overuse it and get into more financial trouble, but you should also have at least one “non-revolving’ term loan, such as a car loan or an investment loan. If you are approved for a non-revolving loan, that loan will provide significant additional help towards rebuilding your credit. Ideally, therefore, it is best to obtain two types of credit – a revolving loan (credit card) and a non-revolving loan (a term loan)
- If my credit is bad, when should I start rebuilding my credit?
The sooner you begin the process of rebuilding your credit, the better. However, if you owe a number of creditors and are falling behind on your payments, you need to take care of your creditors first by either paying them out or by talking to a credit counselor or bankruptcy trustee to advise you of your options.
- If I’m looking to rebuild my credit, is it better to have a credit card, or a loan?
In the long term, we recommend that you have both types of credit reporting to credit monitoring agencies: a non-revolving type of credit (a term loan) and a revolving type, (a secured credit card). Since some people can run into difficulty when managing a credit card, however, a term loan can be a safer, more financially responsible way to start the credit rebuilding process.
If you have started looking for your first, or even just a new home, you’ve probably heard the term “mortgage broker” get thrown around. You may have heard good things, and you may have heard bad things.
Regardless, a mortgage broker is essentially a middleman between the borrower/homeowner and the bank or mortgage lender. They work directly with both the consumer and the bank to help borrowers qualify for a mortgage, whether it be a purchase mortgage or a refinance.
Credit is critical in our society. Our goal is to not only make sure that you learn the basics about how to build a good credit score, but also how to handle your current credit. In our years of working with people and reviewing their credit, we’ve seen that credit is best described as a test. But unlike most tests we take throughout our lives, you aren’t told how to study or prepare yourself for it! And when you take the test, while you might find out if you passed or failed, you don’t find out what areas could use improvement, or what steps you can take to improve your score.