Is it Possible to Get a Mortgage With Bad Credit?
Throughout life, most people run into a time where money gets tight. Maybe someone gets sick or experiences a job loss, or a reduction in hours, whatever the reason times like this often result in people relying on credit more heavily than they would otherwise. So, what happens with that relying on credit ends up hurting your credit? Maxed out credit cards and lines of credit can leave you feeling like your drowning. Not only that, but it can also leave you feeling stuck, stuck with an overwhelming debt and bad credit that is forcing you to stay put instead of moving ahead.
The good news is that when it comes to homeownership bad credit doesn’t necessarily mean that you’re stuck. Think of it more as a detour, there are a still some things that you can do to get to homeownership, it simply might take a few extra steps to get there.
Check Your Credit Score
In Canada, your credit score is a fluctuating number that is assigned to you by the credit bureau. This number is based on your credit history, meaning that if you have been able to pay your bills on time, and not taken on too much debt, you will have a higher and better score. If you have missed payments or have had to max out your credit cards and lines of credit, you will likely have a lower score. Ideally, when applying for a mortgage you will have at least a 680 credit score. If you do, the likelihood of being 
proved for a traditional mortgage increases, if you don’t you will not likely be approved by any of the big banks.
If you are unsure of what your credit score is currently you have a few options. You can pay either of the major credit bureaus Equifax or Transunion for a copy of your credit report, or you can visit sites like Credit Karma and Borrowell who are able to provide you with your score for free.
Find an Alternative Lender
If after you check your credit score you realize that you are likely not going to be approved by a traditional bank, you will have to find an alternative lender. These are also known as subprime lenders or bad lenders as they provide mortgages to people with bad credit. It is important to note that one of the reasons these loans are available is because they come at a significantly higher interest rate. In other words, you will not be getting a competitive mortgage rate, in fact, you will be getting a significantly higher mortgage rate than most people. However, if homeownership is something that you want sooner rather than later, these higher rates can be considered the best options.
Have Cash Handy
In addition to having to find an alternative lender, often homebuyers who have less than stellar credit are also required to put down a larger down payment. This is because having bad credit categorizes you as being a higher risk than someone with good credit. The unfortunate reality is that because of your bad credit you might have to have 20-25% set aside for a down payment, as opposed to the 5% that a first time homebuyer with bad credit would need.
Additionally, you might also be required to pay your mortgage broker (should you work with one) an additional fee of about 1%. This is because banks don’t generally pay mortgage brokers for bringing them high-risk clients (clients with credit issues). Knowing that it is crucial that you be aware of what that means. Say you want to buy a $200,000 home:
200,000 x 0.2 = $40,000 (downpayment) 
200,000 x 0.01 = $2000 (Additional Fee)
That means that in order to purchase the property you would need to have $42,000 on hand.
In Conclusion
While the idea of buying a home might seem appealing, if you have bad credit it might be worth giving it some time and trying to sort your finances out first. By no means, it is impossible to purchase a home with bad credit, but it will end up costing you a lot more in the end.
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