Buying a new home in Prince Edward Island can be an incredibly exciting time. You get to choose the exact home you want in the location that best suits the life you live. There is nothing quite like moving to a new home that’s all yours. However, it is also one of, if not the biggest purchase you will ever make and as a result, the process comes with its own set of struggles and stress.

Click here to learn the features you’ll want to see in your 2018 mortgage contract.  

Credit Score Required For Mortgages in PEI

Part of the stress related to the home buying experience comes from getting qualified for a mortgage. A mortgage is a large loan that is often worth hundreds of thousands of dollars, so as you can imagine, your lender will want to take all the necessary steps to ensure you are a suitable borrower.

One of the biggest deciding factors for the type of mortgage you can get approved for (if you can even get one at all) is your credit score. In Canada, your credit score can be anywhere from 300 to 900. The higher your credit score, the better interest rate and overall loan that you will get.

So how high of a credit score do you need to get a mortgage in Prince Edward Island? Well, that will depend on your lender. Anything under 600 is considered a “bad” score, and anything over 750 is seen as “excellent”. Generally, as long as your score is over 650, you shouldn’t have a problem getting a mortgage.

Want to know how you can improve or fix your credit score in 2018? Find out here.

Mortgage Insurance Rules

If you have 20% to put down for a down payment, you do not have to worry about mortgage insurance. However, if you can’t, you will be subject to this mortgage insurance. This insurance (which is often known as CMHC insurance) is required for those with a down payment between 5% and 19.99%.

This insurance basically helps protect lenders in the case of loan defaults and will cost borrowers about 2-4% of their mortgage amount. However, it helps people who can’t get a huge down payment to still be able to become homeowners.

Look here if you’d like to know how to borrow money for a down payment.

However, there are some rules and requirements that you must meet in order to qualify for mortgage insurance. These include:

• The maximum amount of an amortization period for an insured mortgage is 25 years, so you are not allowed a 30-year mortgage if you require mortgage insurance.
• If the purchase price of the home is between $500,000 and $999,999, a higher down payment is required. There is a required 5% for the first $500,000, and then 10% of the remaining amount. So if you are getting a large or expensive home, be aware of this rule, or you might not be saving enough.
• If you are looking to buy a home over a million dollars, you need at least 20% for a down payment, or you won’t be able to purchase the home.

If you are ever curious about how much you will be paying in mortgage insurance on a mortgage in PEI, there are several online calculators that can help you out. While it is normally a small amount in the grand scheme of things, some people might be better off waiting until they have a 20% down payment before trying to secure a mortgage.

Interested in how much it costs to buy a house in PEI? Check out this infographic. 

Mortgage Pre Approval

Before you actually start your house hunting journey, you will want to go through “pre-approval”. This process is when a lender will look at your finances and give you an idea of how much they might loan you and at what interest rate. This will help you know what sort of mortgage you will be able to get, which can help a ton with your peace of mind while searching for a home.

While it’s optional, it can help show sellers that you mean business, are serious about buying and are a good candidate to receive financing. Pre-approval also helps you be able to figure out your payments, and some lenders might even be willing to “lock in” an interest rate for you.

Want to learn about personal loans in Prince Edward Island? Check this out.  

Getting the Best Mortgage Possible

If you are looking for a mortgage in Prince Edward Island, look no further than Loans Canada. We are confident we can help you get the best mortgage possible for your needs.