Owning a home is an exciting journey, but if you have bad credit it may seem like an impossible dream.
The team at Group Capital can help connect you with solutions that will make homeownership a reality. We offer the lowest interest rates in the GTA. Our mortgage experts will work with you to develop a mortgage plan that will make homeownership affordable and let you enjoy financial peace of mind.
What Do Lenders Look At When Assessing Mortgage Applications?
Your credit report is just the first step in assessing whether you are eligible for a mortgage.
There are other factors your lender will use to determine if you have the means to carry a mortgage if you have bad credit.
Credit History
Your credit report will provide a history of your finances including loans, collections, and outstanding debts. This lets lenders see if you are responsible for your money and have made efforts to repay your debts.
If there is something in your credit history that doesn’t seem right, you can call the creditor and ask them to remove the negative information.
Income and Employment
The first step to repaying a mortgage is having a steady income. Your lender will look at your employment history to determine if you have a strong source of income. If your employment history indicates that you change jobs a lot or have large gaps where no income was coming in, you may not be approved for a loan. Make sure your lender knows about all sources of income including ‘side hustles’ which may help demonstrate that you can make repayments on time and in full.
Down Payment
The best way to get approved for a bad credit mortgage is to make the largest down payment possible. This demonstrates that you are committed to paying your debts and have the resources to make ongoing payments. Remember, if you have a low credit score, you may be expected to make a down payment of 20%, this will give you more equity in your home and lessen the length of your mortgage and improve your mortgage rate.
Property Value
The value of your property will increase the chances of being approved for a bad credit mortgage. If your home is appraised at a high value, it shows the lender they have a worthwhile investment if you default on the loan.
A few simple steps you can take include:
- Increasing your income – Take on a second job or side hustle to increase your cash flow.
- Reduce your debt – Pay down your high-interest debt or outstanding debts to improve your credit score.
- Look at alternatives to traditional lenders – Banks and credit unions require much stronger credit scores and collateral when approving loans. A private lender can help you get the money you need even with low credit.
The team at Group Capital can help you evaluate your financial situation so you can still get a mortgage even with bad credit. Contact us today to learn how you can take advantage of our low mortgage rates. Check out our mortgage calculator to see how much you can qualify for and take the step toward homeownership.
Bad Credit Mortgage FAQ’s
How to check your credit score for a mortgage in Canada?
Knowing your credit score is the first step towards any significant financial purchase or loan. Based on their income and debts, Canadians are assigned a credit score between 300 and 900. The higher your credit score, the more likely you are to qualify for loans or debt relief.
You can access your credit score through two credit bureaus: Equifax and TransUnion. These organizations have access to all your financial information including credit card debt, mortgages, and any financial accounts you may have. Based on your debt to earnings ratio, they calculate a credit store which lets lenders know if you have the financial means to handle debt.
A credit report will be put together that shows your current financial picture as well as any outstanding money owed or collections. Things like collections remain on your credit score for several years so it is important to try and eliminate the potential for bad financial reports as quickly as possible.
The higher your credit score, the more likely you are to be approved for a loan and receive a better interest rate. If you are applying for a mortgage, a credit score of 620 or higher is preferred. This demonstrates that you have the financial means to pay your debts without default.
How can I get a mortgage with bad credit?
Bad credit doesn’t mean homeownership is out of reach. Talk with your lender about how you can improve your chances of getting approved.
- Make a higher down payment – a higher down payment reduces the amount of money you will owe long-term and increases your chance of getting a better mortgage rate.
- Shop around for the best rate – Not all lenders are the same. Banks will have a much higher rate than a private lender. So do some investigating and don’t say yes to the first-rate you are offered.
- Use a co-signer– a parent or trusted partner can cosign for your loan. This lets the lender know that if you default, there are alternative sources of income to pay your loan.
- First-time homebuyer programs – There are many programs available through the federal government to help first-time homebuyers get on the property ladder. See which ones you may qualify for to reduce the amount of money you have to borrow.
