What does a mortgage lender look at when he is deciding if he should grant a home loan to a borrower? One of the most important things is the borrower’s credit rating. This will give the lender an idea of the risk he is taking with this borrower.

If you do have less than perfect credit there is a strategy that you can use in order to achieve your dream of owning a home. You will need to follow it in three to four steps; it can’t happen right away, but following these steps will mean that eventually you will obtain the best home loan rates (taux hypothécaire) available to you.

Step 1: Get a mortgage

Depending upon your credit history, the first step is to have a three year fixed mortgage with an interest as low as possible (even if, in certain cases, you are risking your mortgage period being too short.)
There are several lenders (over 10) whose mortgage financing criteria is less strict than others. There is a solution for almost any credit situation!
There are two major factors that control the interest rate that you will receive, the most important being your credit rating and your down payment.

Step 2: Fix your credit

In the first two years of your home loan, use the period to work on your credit rating. Meet with a good mortgage financing credit counselor specializing in loans for less than perfect credit. He will guide you through all the steps you need to take in order to repair your credit.

Step 3: Get a new mortgage at the best possible rate

Your credit has now improved, so you should be able to negotiate with standard lending institutions to get a good rate (taux hypothèque) on your new home loan. If you work with the right lender for your situation and properly prepare your application for the mortgage application process, you will be able to achieve this. If your credit was really bad in the past, you may have to go through an additional step to get the best rates (taux hypothécaire). (taux hypothécaire)

Advantages:

• Buy a home sooner and be able to benefit from any upswings in home values. (Read our publication: Will housing prices continue to rise? Forecast for 2006 and 2007”)
• You have now a period of time during which you can work on your credit report
• You will get improved rates (taux hypothecaire) in the future - taux hypothecaire

Disadvantages:

• There will be a very high interest rate (taux hypothèque) during the first three years of this plan
• There will be high home loan payments during the first three years of this plan. However, you may be able to keep your payments down by extending the amortization period of the mortgage, and then you can adjust it to a longer period when you take out your next mortgage.
• You may have to supply added documentation besides a mortgage note.
• You will have to pay the assessment fees. But if you work with a financing credit counselor who specializes in poor credit risks you may be able to avoid some of these additional charges.

WATCH OUT!

Be careful of mortgage brokers that have extra fees for so called “difficult” cases. A broker is entitled to a fee if the mortgage is over $90,000 or if the lending institution does not pay it (which it does in over 80% of mortgage loans).

Be careful of any mortgage consultant who
1) Requests to be paid for their fee before the mortgage financing has taken place (at the closing).
2) Has extremely high fees (the normal rate is about 1.8% of the financed amount, with a minimum of $1,500).

Conclusion

The mortgage strategy for “less than perfect credit” can help you to own a home now and to benefit from the fact that real estate prices will probably continue to rise. With a little effort, and the help of a good mortgage financing credit counselor who specializes in less than perfect credit situations, you can quickly obtain the best interest rates. (taux hypothecaire)

Make an appointment now with a “less than perfect credit” mortgage financing expert to find out more about what is possible in your situation. This service is free and without any obligation

Gregory is an Accredited Mortgage Professional (AMP). To get more information on mortgage rates - taux hypothèque, please visit: Hypothèques - Mortgage Intelligence