If you have bad credit, you know that you are in a tight spot – especially if you are looking for a mortgage. However, even with what often feels like mounting financial woes and credit agencies calling your daily, there is a light at the end of the tunnel. And, believe it, or not that light might just come in the form of a bad credit mortgage. Currently, bad credit mortgages are available across Canada, however, let’s focus on Alberta & British Columbia; some specific criteria have to be met in order to qualify with a “B lender”
No one wants to hear that they have bad credit? Unfortunately, bad credit is quite common. And it can be the result of many things: the inability to make payments, too many late payments, or a loan that you forgot about. In fact, you might be considered as having bad credit simply because you just haven’t had any credit in the past. However, once you have a bad credit score, it can be challenging to get any sort of assistance from a financial institution or bank. This can be incredibly taxing if you are hoping to be approved for a mortgage.
People with Bad Credit Still Require Mortgages
Even though having bad credit can make getting a mortgage incredibly tight, it doesn’t have to make it impossible. After all, just because someone has bad credit, it doesn’t mean that they don’t need a place to call home or money to live. At one time it was near impossible to get a mortgage anywhere in Canada if your credit score is below a certain percentage. Once your credit hit the “poor” or” bad” range, you could basically forget about getting a mortgage; the banks would not take a second look.
That said, times have changed, and while getting a mortgage today with bad credit is daunting, it is not impossible. Because the real estate market in Canada is in the midst of a recovery, a bad credit mortgage is somewhat easier to get. Lenders are also looking at the reasons that the applicant has this bad credit rating.
How Can Someone Get a Bad Credit Mortgage?
In order to obtain a bad credit mortgage in Canada, the financial institution that would potentially grant the mortgage will require insurance that the monthly payments can be made. In order for this to happen, an individual’s debt-to-income ratio has to fall within a specific category. The lender must also be sure that the property that is being purchased is affordable. Generally, lenders use a point system to help in determining the eligibility for bad credit mortgages in Canada.
The majority of lenders offering bad credit mortgage loans in Canada will charge you higher interest rates than those with good credit. Additionally, your upfront costs may be comparatively higher. For some, this is a great incentive to make payments, to get the mortgage paid off early. In order for this arrangement to work, both the borrower and the lender of a bad credit mortgage must make sure the borrower will be able to make the regular payments. If not, the individual may fall further behind and even further into the bad credit category again.
Are There Any Benefits to Obtaining a Bad Credit Mortgage?
- The ability to buy a home
- The opportunity to potentially settle any high-interest debts
- Personal purposes such as child support, saving for retirement or divorce settlements
Bad credit mortgages are available; however, the process may be significantly time-consuming than applying for a traditional mortgage. There are many factors that lenders consider, as well as many details that have to be worked out. If you are applying for a bad credit mortgage, both the financial institution and the borrower need to be upfront about any reservations and concerns before a bad credit mortgage can be approved.
If you’d like to find out if you can qualify for a bad credit mortgage please contact us here. Or by phone 1-800-472-9791
The Mortgage Centre -Sky financial Corporation
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