Bad/Poor Credit Mortgage
How do I get approved for a mortgage when I have bad credit?
Are you interested in purchasing or refinancing a home, but concerned that your bad credit will prevent this? Maybe you have already been turned down by your bank? Changes in mortgage financing have made it easier for individuals who have poor credit to get a mortgage. It is quite a bit easier than it used to be, because there are more options available to Canadians who seek a home mortgage.
Even if your credit isn’t in what credit bureaus would consider acceptable (600 and above, typically), that doesn’t mean you won’t be able to purchase a home. It just means that qualifying for a mortgage may be a bit more complicated. A traditional mortgage with a major bank may not be an option, because the mortgage application will not qualify for Canada Mortgage and Housing Corporation insurance. There are other options though.
Alternative Lending Programs
According to a January 29 article in The Globe and Mail, alternative lenders are finding more of a foothold in the mortgage market. The author of the piece quotes Benjamin Tal, deputy chief economist of CIBC World Markets as saying that this type of lender has increased their share of the overall mortgage market from .08 percent in 2008-2009 to 2.2 percent in 2015.
One option for individuals who may not qualify for a traditional mortgage, thanks to poor credit, is to obtain a mortgage through an institution referred to as a trust company or bad credit institutional lender.
A mortgage through a private lender is another option. There are several types of private mortgage lenders. These can be individuals who invest their own money expecting a return; a syndicate that invests money from a pool on a case-by-case basis; or, a mortgage investment corporation – a group of investors that offers funds for multiple deals that qualify.
Factors in Mortgage Decisions
A bad credit mortgage comes with a higher interest rate and higher upfront costs for borrowers than for those who have good credit. A credit rating isn’t the only thing that banks and lenders take into account when determining whether or not an individual is a good candidate for a mortgage. Lenders also look at other factors, like an individual’s income level, down payment amount, property type and value.
An individual’s income level is important. Confirmable income is proven through either notice of assessments, job letters and pay stubs, or a combination of both. Sometimes self-employed individuals or those who work on commission have non-confirmable income. Both types of these income are scrutinized, because borrowers want to ensure that their clients will be able to pay their mortgage payment and still have money left over to pay for other living expenses.
The down payment, or amount of money that a potential homeowner can put toward their purchase/refinance immediately (prior to financing) is important to lenders as well. Typically, the larger the percentage a homeowner puts forward as the down payment, the better. This is partly because the down payment may be all the lender has to have a cushion in the event that a borrower defaults on the mortgage.
If you are purchasing or refinancing a mortgage with bad credit, please be aware that a minimum of 15 percent down payment will be necessary in order to get approval.
Property Type and Value
Often, bankers and firms that offer bad credit mortgages will consider the type of property an individual is purchasing/refinancing. They want to be able to unload the property quickly if the mortgage holder defaults and to be able to ensure that they get the most out of their investment. Having a recent assessment of the property that you are interested in purchasing or refinancing, can show the mortgage firm exactly what they’d buying or helping to secure should they grant you a mortgage.
Three Tips to Make Getting a Bad Credit Mortgage Easier
- Find a co-signer. A co-signer is, in the mortgage world, another individual that can be held responsible if the main mortgage holder gets into financial trouble that leads to default on their mortgage. In some cases, this improves one’s chances of getting approved for a poor credit mortgage, although some lenders may require a co-signer with a strong credit rating.
- Be prepared to show that you have suitable income. As discussed above, bankers want to be sure that potential home buyers can afford their monthly mortgage payments, with money left over to pay for other essentials.
- Have a hefty down payment. You can expect to pay at least 15 percent up front, but if you can give a mortgage lender a higher percentage, that will help to lower your rates.
Call CVE Mortgage Group Inc. Maybe you had some recent misfortune that put a blemish on your credit. Maybe you do not have recent credit activity which has lead the banks to turn your application down. No matter the reason for your credit situation, we are committed to helping you find a poor credit mortgage to get you into your new home. We will find you the best deal on your mortgage loan, in spite of any bad credit.
Feel free to contact us via the form below. Someone will get back to you shortly to help address any questions or concerns you may have regarding a Bad/Poor Credit mortgage situation.