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Mortgage with no credit history?
October 27, 2016
9:10 pm
sphilips
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I have never taken a loan in my life, nor does own a credit card. But I have a job with a reasonable income. I am looking to buy a home in near future. I have heard that a person with no credit history will have a hard time getting a good interest home mortgage. I have contacted a mortgage broker named Butler Mortgage and they also almost said the same, though getting a mortgage is not impossible. Isn't no loans better than a negative credit score and isn't supposed to be much easier for them to get a mortgage or loan for the first time? Can someone advise me about how to make sure I get my first mortgage without a lot of hassles.

October 27, 2016
9:37 pm
Norman1
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I would get a credit card, use it, and pay it off every month. That will start a positive credit history.

If a 22 year old applied for a mortgage and had no credit history, then that could be easily explained. It's only been a few years since the person has reached legal age.

In contrast, there would some explaining to do if a 40 year old applied for a mortgage and no credit history could be found.

October 27, 2016
11:42 pm
Loonie
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I agree with Norman.

I would also ask for a free credit report from both TransUnion and Equifax. These are the main credit rating agencies. This will confirm for you whether or not you in fact have a credit record. It's possible you may have a credit history that you are not aware of and have forgotten something that might have generated it.
You can ask for this for free once a year, which will enable you to monitor your situation after you get a credit card.

If you have trouble getting a credit card, then ask for the secured kind where you give them $500 in advance and then charge against that money and then replace it. After a little while, they will allow you to get a regular card. In this case, I would go to the bank where you regularly cash your paycheque, as they can see that you are getting a regular income and may treat you more sympathetically, considering you probably have no credit rating.

And, no, it's not better, in this society, to have never had any debt or credit cards. I don't know how you have managed without a credit card. It's just about impossible to stay in a hotel or rent a car without one, so, you really do need one. In a lot of situations, it's also safer to use a credit card than to carry around wads of cash, especially if you are travelling.

You will be able to get a mortgage somewhere as long as your income is sufficient, but you may end up with a private lender and a higher rate. Using a mortgage broker is a good idea, but I have no particular one to recommend. Also, a good realtor should be able to provide some help and advice. Note that I said a GOOD realtor. They usually have contacts with mortgage brokers. You're going to need one anyway, so start asking around for a referral where you live. Sometimes, too, a credit union will be more helpful than a bank in cases like this, but you would need to already belong to it.

If you are renting, it might help to get a letter from your landlord saying you have always paid your rent on time and been a good tenant.

October 29, 2016
1:14 pm
Rick
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I would think that your work history, income and down payment would have a definite influence on a decision by any lender. If you wanted a huge mortgage with minimal down payment ....might be a problem. If you went into the bank you have been using all your life and asked for a mortgage with 30, 40, 50% or more of the down payment you want to use sitting in their savings account, might not be a problem. I'd give you a mortgage for half a mill if you had a quarter mil for a down payment. If the interest rate is your concern, you may have to bite the bullet and pay a higher rate until you establish yourself, then renew, so just get a one year term and renegotiate when it's up. My first mortgage was 14%, so even a "higher rate" today is not that bad in comparison. Even if you don't have credit cards, other factors are used to determine your credit rating. Phone, utility. cable and other such necessities will affect your credit rating. Apply for the free reports Loonie suggested if not just for curiosity's sake.

October 29, 2016
3:20 pm
Norman1
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Rick said

…. If you went into the bank you have been using all your life and asked for a mortgage with 30, 40, 50% or more of the down payment you want to use sitting in their savings account, might not be a problem. …

The bank will approve the mortgage. But, the bank won't give the best rate.

When the bank retrieves the credit record from Equifax and TransUnion, they will see the lack of credit history that other lenders would see. As a lender too, they know what other lenders will think and that you aren't in a strong position to negotiate.

That's what used to happen with new immigrants. Even if they had 50% down payments, the big banks would not approve mortgages for them because their risk models didn't take well to no credit history. They had to go to alternative lenders, like Equitable Bank and Peoples Trust. The alternative lenders knew this and charged them a higher interest rate.

October 29, 2016
6:55 pm
Rick
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Norman1 said
That's what used to happen with new immigrants. Even if they had 50% down payments, the big banks would not approve mortgages for them because their risk models didn't take well to no credit history. They had to go to alternative lenders, like Equitable Bank and Peoples Trust. The alternative lenders knew this and charged them a higher interest rate.

I agree... probably won't get the best rate, but new immigrants with no history in the country are a different scenario than someone that has been living, working and banking in the community all their lives. Not sure exactly what sphillips's situation is in regards to his citizenship and/or banking history, but no doubt the "best rate" might be a little more difficult to achieve for him unless he has a very personal relationship and history with his bank.

October 31, 2016
6:59 am
Hoodie
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I feel for you sphilips, but either not knowing how credit works, or choosing not to build credit in the first place may be red flag for most lenders!

I was new to Canada in 2006 and had no credit history. I had to do what was suggested and put down $500 for a secured credit card to get the ball rolling on a history. I paid this down each month, put bills in my name, and got a car loan with my wife as a guarantor. We were lucky that her credit was good because a house loan would have been out of the question. Eventually we were offered cc with up to $25K limit... we keep it at $10k

10 years on and 3 properties, i have a strong credit history and can haggle from a position of strength as any lender wants my business. Good credit takes time and showing you can use it responsibly and pay your debts is the key. No late payments, frequent and responsible usage.

If i were you, i'd try a local credit union. They sometimes step up where banks will not. I saw an interesting post on http://www.theglobeandmail.com.....e32587351/ , this forum gets a mention, but so does the idea of getting a mortgage online. Anyone out there tried this?

October 31, 2016
8:50 pm
sphilips
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I am a Canadian citizen and I know very little about taking loans or mortgages because I never have taken one before and thought about taking one until now. As you have suggested if taking a credit card and using it to create a positive credit history will work, I am ready to do it. Actually I think that's a great idea if it works. I am now aware that I should be more aware about how credit and credit score works. Thank you for the helpful replies.

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