Credit: The good, the bad and the none
This year, I have had the pleasure of working with quite a few first time homebuyers.
I love working with first time home buyers!
It’s an exciting new adventure for them and I’m able to guide them through the process to keep it fun and enjoyable.
Often the buyers are an enthusiastic young couple who have scraped together the downpayment, and are now venturing off into the vast world of real estate…only to find out there is big bad thing called credit.
Before the home shopping starts, it’s always a good idea to find out if buying a home is even possible. What do you need to know? Having the downpayment is only the beginning.
The group that is going to lend the money on the home is going to look at history. Not the wild west, or the Roman chariots kind of history, but credit history. Is it good? Bad? Non Existent???
If it’s good, let’s go shopping!
If it is in the range of the latter two, it is not the end of the world: you have options.
When there is a black mark on the credit score, there are ways to fix and erase it. It will take time, negotiation, and probably paying off whatever put the black mark out there in the first place, but it can be fixed. Once that is done, the options become much more appealing.
Then there is the case of non existent credit.
Interestingly enough, I am seeing much more of this. Why? Here is my theory: (It’s my theory, and mine alone!)
People in their very early 20’s, graduated from high school just as the world economy took a nosedive. They may have looked at their older siblings, parents, and friends who had built a load of debt and couldn’t find their way out of it (creating scenario number 2: Bad Credit!) and didn’t want any part of that. These younger people made a decision to not have a credit card, to not take out a car loan, and to not build up a mountain of debt. They pay upfront for everything they need, and don’t go overboard. To this I say, awesome!!!
Unfortunately, this also builds a situation of zero credit history. The banks or lenders have no idea who these people are, or how they will treat a payment plan. They are going to be very reluctant to lend money for a house, when they don’t even know what their credit card history looks like….because there isn’t one.
So, in being responsible adults and living within their means, these buyers have now found themselves in a situation where they can’t borrow money.
There are some very easy, and inexpensive ways to build a credit history. One way is the prepaid credit card. Another is to take out a small loan. Hey, an RRSP loan will do it!
My suggestion is to go see a qualified mortgage specialist first. Let them look over your credit history, good, bad, or none, and let them guide you through the many paths of obtaining credit. Once the information has been gathered, and a plan is in place, moving forward is going to be a much easier task.
That’s when it’s time to call me so we can go shopping!
Call me at 250.549.9022