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Debunking Home Buying Credit Myths

By
Real Estate Agent

I was once a first time homebuyer and heard a lot of home buying credit myths. I was terrified in purchasing a home. My friends and family members were quick to give advice about the home-purchasing process. As a result, I encountered several home buying credit myths that temporarily stopped me from buying a home. That advice reinforced some of the most common home-buying credit myths. Let’s take a closer look.

Myth #1: You need perfect credit to purchase a home.

It is true that an individual’s credit score has an impact on the mortgage loan approval process and the resulting interest rate. However, perfect credit is not needed to secure approval for a mortgage loan. While credit scores can range, the higher your credit score, the more options you will have to find a mortgage with better interest rates. That’s all! Pretty simple.

Myth #2: Lenders can share your personal credit information.

Absolutely not! You must give permission for a lender to share your information with someone else. In Ontario, the Consumer Reporting Act helps us to protect our personal information. Under this Act, we are afforded with several rights:

-the right to revise incorrect information about personal credit history
-the right to know what is being reported
-the right to ensure that information given by agencies is being correctly collected, stored and reported.

Myth #3: Lenders only use one scoring model that determines creditworthiness.

There are a number of credit-scoring models used to determine credit risk in today’s marketplace. For example, many lenders use the Equifax and Transunion as one models for determining credit worthiness. While scoring models vary, many of the same factors influence your credit score, including your payment history and your level of debt.

In closing, before you start your house hunt, determine what you can afford to pay each month. Preapproval allows you to determine how much you can shop for and afford. It will also give you an advantage when it comes time to negotiate your home mortgage.

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