Mortgage rates and credit scores seem to go hand in hand, especially when you’re looking for the best mortgage rates in Toronto. The higher your credit score, the better your mortgage rate.
At Northwood Mortgage, we work with home buyers across Ontario. We know the ins and outs of Toronto mortgages better than most. We work with clients to help them achieve the best possible rates from available lenders.
In this article, we’ll talk about how your credit score impacts a mortgage rating and what you can do to improve it.
What is a credit rating, and how is it calculated?
A credit score is a value representing your likelihood of repaying your debt. It can range anywhere from 300 to 900, with the average score in Canada being 650 to 724. The number is calculated based on a variety of factors, including:
- Repayment history
- How long you’ve been building credit
- Recent credit applications
- Current debt
- Types of debt/credit you possess
Anything below 600 is out of the “good credit” zone. Numbers below 600 could impede your ability to get a loan or could result in a high mortgage rate.
Your Credit Score vs. Your Mortgage Application
Credit scores impact mortgage rates because of your risk as a borrower. Lenders loan money to earn money. They get back their investment, plus interest.
An applicant with a poor credit score is deemed less likely to make timely payments. This impedes lenders from earning back their investment.
The better your credit score, the more reliable an applicant you appear. For new home buyers, a credit score can make all the difference in the options available to you for a mortgage.
What else do lenders consider?
As your mortgage application is processed, lenders consider a variety of factors apart from credit score. For the best mortgage rates in Toronto, lenders want to see promise in areas such as:
- Job permanence
- Amount of debt
- Repayment history
- Personal expenses
- Down payment amount
Each of these factors plays a role in your eligibility for a good mortgage rate.
So, does credit score really matter? Yes. An applicant with a good credit score and positive answers in each of these categories will have more mortgage options. Even a high down payment and a rich employment history can’t completely offset a poor credit score.
Work with a Mortgage Broker
Mortgage brokers deal with multiple lenders, including nontraditional lenders. At Northwood Mortgage, we understand that no two borrowers are alike.
Many things affect finances throughout our lives. We work with home buyers of all backgrounds to find the best possible mortgage offers based on where you are now financially.
A mortgage broker can also work closely with you to build a better application. We help many clients spot weaknesses in credit scores and other areas of a mortgage application.
Contact Northwood Mortgage
If you live in Ontario and want to find the best mortgage rate in Toronto, call Northwood Mortgage. Our brokers are happy to help you better understand your credit rating and build a promising mortgage application. Call us at 1-888-495-4825 today or contact us online.