Can You Get a Mortgage With Bad Credit?

Understanding the Challenges of Buying a Home with Bad Credit

It is fairly common for people to not be able to afford to buy or mortgage a home these days. Many people get into credit trouble when they have unexpected emergencies like car trouble, job loss, health trouble or even just poor financial choices. When things like this occur, it takes time for you to get back up on your feet again which is one of the reasons why people put off buying a home. Then there are those who have everything in place but good credit and want to buy a home right away. So if you happen to have bad credit and want to get a mortgage for a home, there is some good news - there are options available for you. The only thing is, they aren't the most affordable options. You can check your credit score to see where you are falling on the score of 300 to 900 that is assigned by the credit bureau. In Canada, these are TransUnion and Equifax. These days, it's easier than ever to get your credit score, and you don't have to sit down with a broker or pay to get yours. You can go through online credit managing services like Mogo Mortgage or Credit Karma which will tell you your current credit score and keep track of it for you. Credit Karma even alerts you when there have been adjustments made to your credit score and when you are behind on payments that may affect it. Usually, if you pay your bills on time and haven't claimed bankruptcy, you should have a good credit score that is above 680. If you don't, then your credit score could fall in the fair or bad category which is where you will need some extra help.

Exploring Lender Options for Bad Credit Mortgages

So in these cases, you'll have to look for a "B lender" or "subprime lender" from financial institutions that work with people who have poor credit scores. If you have gone through bankruptcy within the last 5 years, you may also have to look into going with a private mortgage lender. If you have poor credit, you'll want to save a larger down payment to show up front. This will look good to lenders when they are considering your application. They will look at your income, credit score and debt levels. If you are showing up to the lender with bad credit, this means you're a higher risk for them which means they will want a larger amount for your down payment which will usually be about 20% to 25%. This will also mean that you'll have more equity in your home from the start which gives you a bit more leverage to negotiate your mortgage rates. Along with the higher down payment, you'll also need extra money for fees. The lender can charge 1% of the mortgage loan value just for processing the credit application, and the broker might also charge you 1%.

Improving Your Credit for Better Mortgage Rates

The other thing that you won't have access to if you're applying for a mortgage with bad credit is the best rates on a mortgage and interest rates. Although, you could access lower rates upon renewal if you make your monthly payments on time and work on improving your credit score. This means using your credit cards responsibly and working on paying off any debts you have. So if you want to buy a home right away but have bad credit, it's great to know that there are some options out there for you. However, the best idea is to take some time to work on building and improving your credit so you can get the best mortgage rates possible.