Reasons You Might Need a Bad Credit Mortgage

There are a number of reasons why you might need to apply for a bad credit mortgage. These reasons include:

• Having a poor credit score
• Not having any established credit
• Having previously gone through a bankruptcy or consumer proposal.
• Are a newcomer to Canada.
• Are an offshore investor without a credit history in Canada.
• Are self-employed and cannot verify income by traditional means.

How much do you need to save to buy a home with bad credit?

When it comes to buying a home, credit is just one part of the process. While it is a big part, there are other items you will need to get in place before you can buy a home.

When you purchase a home, you will need a down payment in order to secure the financing. Usually, you will require a minimum down payment of 5% - but of course, if you can make a larger down payment, it is to your advantage to do so, as it will mean that your mortgage payments will be lower.

Additionally, you should have funds available for items like lawyers’ fees, land transfers and title searches. And, if this is the purchase of your first home, you may qualify for certain rebates and government incentives.

And if this sounds complicated, don’t worry. Our agents will be with you every step of the way to help you through the process.

Have An Attractive Application

Mortgage lenders are understandably leery of granting mortgages to those with poor credit. Because of this, if you do have bad credit, it is of the utmost importance that you make your mortgage application as attractive to them as possible. This will show any potential lender that you are serious about making your payments.

To make your mortgage application as attractive as possible, you will need to gather all of the documents that your mortgage broker asks you for. This will usually include things like your Notice of Assessment, pay stubs, and other financial documents.

For example, if you’ve been working at the same job for a long time – and getting a steady income – this is something that a potential lender would want to see. To obtain a supporting document for this, you may need to go to the HR department where you work and ask for a record of employment.

Including these kinds of supporting documents in your application can go a long way to help you get approved for a bad credit mortgage.

Why You Should Get Pre-Approved For A Mortgage Before You Start House Hunting:

Regardless of how good or bad your credit is, it is important to get pre-approved for a mortgage before you start looking for a home. Your pre-approval will let you know exactly how much of a home you can afford and give you an idea of what your mortgage payments will be once you become a homeowner.

Also keep in mind that many real estate agents will not work with you unless you’ve already been pre-approved for a mortgage.

During your application process, you will work with one of our agents, who will explain your various mortgage options and then work to find you the right type of mortgage and lender that suits your needs.

Why you should get pre-approved for a mortgage before you start house hunting.

Regardless of how good or bad your credit is, it is important to get pre-approved for a mortgage before you start looking for a home. Your pre-approval will let you know exactly how much of a home you can afford and give you an idea of what you mortgage payments will be once you become a homeowner.

Also keep in mind, that many real estate agents will not work with you unless you’ve already been pre-approved for a mortgage.

During your application process, you will work with one of our agents who will explain your various mortgage options and then work to find you the right type of mortgage and lender that suits your needs.

Tips for Getting a Mortgage When You Have Poor Credit.

Poor credit history shouldn’t prevent you from becoming a homeowner. Here are a few tips that can help you get a mortgage even when you have poor credit.

We work with dozens of lenders, some of whom specialize in offering clients debt consolidation loans. Getting out of debt can be very difficult, for anyone, and we know it can be hard to ask for help in paying it back. We are here to work with you and get you the loan on the terms and payments that will work for you, so you know exactly when you will be out of debt.

Save a Larger Down Payment

Typically, first-time homeowners only need about 5% of the purchase price of the home (depending on the purchase price); however, if you can save more than the 5%, it can help your case for purchasing as it shows you have financial stability.

Think About Getting a Co-signer

Another option if you’re looking to get a mortgage with bad credit is to get a co-signer. A co-signer is a person who acts as a guarantor for your mortgage. If you become unable to make your mortgage payments, then your co-signer is equally responsible for making the payments.

By getting a co-signer who has good credit to vouch for you, you will be adding a lot of strength to your mortgage application.

Important: If you do get a family member or friend to co-sign for you, it is important to remember that they are putting a lot of trust in you. If you default on your mortgage, they become legally responsible for making the payments. Getting a co-signer, therefore, is something that should never be undertaken lightly.

Proof of income

Being able to demonstrate proof of income is incredibly important when it comes to getting a mortgage with bad credit. Lenders will want to know that despite your bad credit, you still have a regular paycheck and that you will have the ability to make your loan payments.

Typically lenders will look at something called a Gross Debt Service Ratio (GDSR). The GDSR is a formula that determines how much of your monthly income will be needed in order to pay off your mortgage.

Bad credit mortgage lenders will typically allow your GDSR to be as high as 35%, but it is recommended that you keep your GDSR to no more than 30%. So if you figure out what 30% of your income is, that should be the maximum payment that you’ll want to make on your mortgage each month.

Professional Property Appraisal

The main recourse that any lender has when a borrower defaults on their mortgage is to take possession of the property and sell it. This allows them to recover the money that they lent out in the form of a mortgage.

In order to know how much risk they are taking, a lender will often want to know the value of the property. For this reason, they will usually require a professional property appraisal.

Because mortgage brokers have professional contacts with property appraisers, they can help you with this as part of the mortgage application process.

Work with a Broker

If you only go to one financial institution, then you are limited to the financial products they can offer. However, if you choose to work with a mortgage broker, you will have the doors opened to working with dozens of lenders across the country. Our brokerage has many connections with lenders who specialize in working with those who have a poor credit history.