Having a bad credit rating is often frustrating as it reduces your credibility when it comes to finances. The lenders may sometimes have not confidence in you which can become a barrier for you to access loans.
But does it always mean that if you have a bad credit, you can never get a mortgage in Canada? The answer is NO since there are other alternatives that you can use to convince the lenders to have confidence with you as illustrated below.
Determining your credit score rating should be your initial step. Credit score rating in Canada is done by credit bureaus such as Equifax and the TransUnion. They will provide you with your credit score rating number that ranges from 300 to 900. The number is used by the mortgage lenders to review your previous credit rating history.
You will be required to pay a small fee to obtain your credit score from credit bureau although you can access the same details through a trusted mortgage broker at no cost. If your previous engagement with lenders is clean, you will receive better credit score of above 600. In case you receive a low credit score, consider using the following next option.
Look at alternative mortgage lenders than banks (as called ‘B Lenders’) who can also provide you with a mortgage. In the Canadian Mortgage market, “B Lenders” are mostly the trust companies and other financial institutions which have taken the risk of working with individuals with less than ideal credit ratings. In the case you have gone bankrupt, you can still acquire mortgage by making a special arrangement with a private mortgage lender.
There are some factors that you should consider in when you are faced with bad credit rating. The lender who decides to give you the mortgage will require you to make a higher down payment than an individual with an excellent credit score rating.
In most cases, many lenders in the Canadian Mortgage market will ask for a higher than normal a down payment (potentially 20-25%). You can use this to your advantage by paying the required deposit, and this will save you from paying huge leverage in the end.
Higher interest rates on mortgages are also imposed to people with bad credit score compared to others with better credit rating scores, but you will still qualify for the mortgage.
The best way to get a mortgage if you have poor credit is to enlist a professional mortgage broker who understands different lender requirements, understands what you are able to pay and structures a deal that works out best for you.
Do you have a bad credit score and you want to get a mortgage? Contact PrestoMortgages today, the trusted mortgage broker in Ontario’ for professional advice and you will be guided on how to go about it.