Mortgages and Credit Records

Nowhere is the disappointment greater than when a person has the ability to buy a home, yet can't get mortgage approval because of weak or scarred credit record.

When you apply for a home mortgage, the lender will conduct a credit check which will include credit history, income size, employement stability, net worth, size of down payment and the type of property being purchased via a mortgage. Credit verification services that are used are Equifax and TransUnion Canada credit profile services.

A number of debt versus income rations are calculated by the lender including:

Credit Evaluation

Gross Debt Service which is the total cost of buying the property (your home loan) you are wishing to finance divided by your income (Mortgage Payment, property taxes, utilities, and ½ condo maintenance fees) divided by your total income. Normally 32% is the highest ratio accepted.

Total Debt Service ratio is the sum of your liabilities divided by your income (mortgage payment, property taxes, utilities, and ½ condo maintenance fees \ Gross Family Income. Normally 40% is the highest allowable.

At Genworth Financial for instance, you can buy a house for as little as 5% down, however if you make a down payment of 25% or more, of the lending value, you may qualify for a conventional mortgage. If you are making a down payment of less than 25%, the mortgage must be insured. Finding more money to contribute as a downpayment is bound to affect the overall worthiness for the home loan. The current Home Buyers’ Plan permits the first-time homebuyer to withdraw up to $20,000 from their RRSP to buy or build a home.

*(reprinted with permission of Genworth Financial)