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In the past I’ve talked about the importance of connecting with a mortgage professional before you head out shopping for a new home.
Even if you currently own a home, qualification guidelines and available programs change from time to time so even if you qualified in the past your numbers might look different now. Another important reason to do your homework is to find out if you have any issues like blips on your credit that need to be addressed. Taking the time upfront to make sure you are ready to go can save stress and heartache down the road.
Lenders and insurers (CMHC, Sagen, and Canada Guaranty) want to work with clients that have a demonstrated track record of managing their credit responsibly.
I am currently working with a lovely couple that have both been through challenging separations. In her case, her ex refused to pay any child support, so she raised her children on her own. As a single mom, her finances were tight and sometimes she had to make difficult decisions about what got paid and what did not.
In his case, things were pretty amicable with his ex until they weren’t. He hadn’t bothered to take his name off one of their credit cards and left all of the utilities in his name on the understanding that she would be paying them on time.
The couple I’m working with has been together for about five years. They have worked hard and saved over $30,000 for their down payment and closing costs. They are limited credit seekers and are meticulous with managing their credit cards and car loan. We had their application ready to go and as the last step I pulled their credit reports to make sure there were no surprises before I sent them out shopping.
Ugh.
It turned out that she had three unpaid parking tickets that had gone to collections.
His ex had moved and left significant outstanding balances on all of the utilities. The credit card was consistently paid over 30 or 60 days late. Because the mail and calls went to her, and because he hadn’t applied for credit in over four years, he wasn’t aware of the damage done to his credit bureau.
Although life happens and there are explanations for these situations, I couldn’t find an insurer that was willing to entertain an application for them. Heartbreaking when they’ve worked so hard.
I recommend that everyone, not just clients preparing to buy a home, check their credit at least once a year to make sure there are no surprises.
If you have suffered through identity theft in the past, even if you have a warning on your credit bureau, this is even more important. Over the last few years I’ve worked with two clients whose information was compromised not once but twice.
Your track record of managing your credit is one of the most important pieces considered by lenders when deciding whether to approve or decline your application.
The positive news is that if you have had credit issues in the past, there are ways to update and correct your credit history. Take a few minutes to check your credit bureau – you may be glad you did
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.
