Bad credit or bankruptcy will lower your chances of getting a mortgage, and many lenders, including Banks, will reject your mortgage application. This does not mean it is impossible, it may still be possible to qualify for a mortgage and buy a home, even if your credit history is far from perfect. There are such a thing as bad credit loans.
Improve your Bad Credit
What is very important to your lender is your credit history when approving you for a mortgage. One of the first things you will want to do is find out exactly what your credit score is by obtaining a free copy of your credit file by mail. There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check with both bureaus. You can then take steps to improve it.
Here are some steps to take to improve your credit score:
- Correct any errors or misinformation that is showing up on your credit report. Dispute any errors, you have the right to dispute any information in your credit report that you believe is wrong and ask the credit reporting agencies to correct errors. It’s free. Errors can give lenders the wrong impression and you could be turned down for a credit application or be charged a higher interest rate.
- Total monthly expenses and calculate how much of that is debt that you’re carrying around.
- Pay bills on time.
- Use credit card carefully and start to focus on repaying debt rather than incurring it. If credit card remains a necessity, look for low-interest credit cards.
- Consolidate your loans and credit card debt into one larger loan.
- Avoid going over the limit on your credit card. A high balance will have a greater impact on your credit score.
- Restrict the number of applications for credit that you make. Too many inquiries into your credit within a short time can have a negative impact on your credit score.
- Contact your lenders and make inquiries about alternate repayment solutions if you need to do so. They can most probably recommend where to get bad credit loans.
Even if your credit rating is not stellar, it doesn’t mean you cannot qualify for a mortgage loan in Canada. There are institutions offering bad credit loans, but keep in mind, you will be paying a higher mortgage rate.
Make Changes to the Way You Spend
- Prevent yourself from falling into debt again and using credit cards for extra spending such as holidays, birthdays, etc. by setting aside extra money.
- Develop a plan to reduce your debt that includes evaluating your lifestyle and the money you are spending and puts any “found” money toward debt reduction.
- Consult a credit counselor. Canada has many not-for-profit agencies that can help you assess your options.
- Commit to saving at least $50 a week; even by saving this amount can add up to $2,600 in a year to add to your down payment amount. The more down payment you can make, the better your chances to be approved.
Find a Reliable co-signer
If you are looking to get funding for your bad credit mortgage, it would increase your changes at being successful if ask a friend or family member with good credit to co-sign your mortgage application. Mortgage lenders often require a co-signer to guarantee bad credit loans and a co-signer gives the lender added protection. But be advised this will make the co-signer responsible if you do not meet your mortgage obligations.
Contact a Mortgage Professional that Specializes in Bad Credit Loans
There are some mortgage brokers in Canada that specialize in getting mortgages for borrowers who may find it difficult to obtain a mortgage, whether it is a bad credit score, bankruptcy, small business owners, homeowners who have built up equity but do not meet income requirements, new immigrants to Canada and first time home buyers.
Some of the mortgage lenders we feature in our mortgage broker section on CompareMyRates who deal with Bad Credit Loans is Home Trust and Dominion Lending Centres and many more. Home Trust is a one of Canada’s leading mortgage lenders who offer an alternative to the major banks. Most of there customers fall into a few groups; whether you have bad credit, a small business owner, new to Canada or do not meet income requirements, Home Trust understands each customer is unique, and take pride in providing a personalized, hassle-free experience, offering flexible income verification, and every application is reviewed by a person, not a computer. Dominion Lending Centres has a specialized department that has access to alternative lending sources.
A best mortgage broker can help you find an institution with the best interest rates available to you. This will let you assess whether home ownership needs to be postponed for a complete of years, or whether you can take the loan now and adjust the mortgage at renewal or after a couple of years.