Let’s face it – maintaining a great credit rating can be hard, leaving many to search for a “bad credit mortgage.” A bad credit mortgage is simply that – a mortgage for people whose credit score is low. Typically, the big lenders only want to lend to people with good credit. Those with a high credit score are seen as “low risk”, and more likely to be able to pay their mortgage on time.
But just because you have bad credit, does it mean you cannot get a mortgage? No. But it does mean you’ll need to work with a mortgage broker to connect you with banks that will lend to borrowers with bruised or poor credit.
Tell Me More About Credit Ratings
Credit scores – how are they set? It’s not really a transparent process. But at its basics, the system is pretty simple.
- Do you pay bills on time? If you don’t pay them on time, your credit score will go down. If you have the money, paying your bills on time is one of the simplest ways to start improving your credit score.
- Are you “maxed out” on your current credit? How much of your available credit are you using? Yes, it’s there to use, but if you’re maxed out, your credit score will be lower. If there’s room on your cards, or in your line of credit, your credit score will be higher.
- The number of inquiries into your credit file. This is one of the more challenging ones, because you may not know if an institution has put an inquiry in. Basically, if you are applying for a car loan, mortgage, credit card, or line of credit, the lending institution can look into your credit file. Each of these “inquiries” can affect your credit score. But this really only matters if it is happening all at once, and does not have as big an impact on your score as the first two factors.
- Your credit history. If you have a “long credit history,” for example, you’ve had a couple of credit cards for many years and have been paying them off on time, you’ll have a higher score than someone who has never had a credit card or line of credit. Those who have no credit history are seen as a risk because their ability to pay back a loan is unknown.
People with the best credit ratings tend to get the best lending rates and are more easily approved for a mortgage. If you want to learn a little more, read our blog on credit or this article from Equifax.
What About That Bad Credit Mortgage?
There are lots of reasons you may have bad credit, and it may not stop you from getting a mortgage. However, you might have to look at alternative lenders or private lenders. That’s where a mortgage broker like HW Advantage can really help. We have access to more than 35 Canadian lenders, and we can tap you into lenders “outside the box.”
Trust companies, smaller banks, and credit unions sometimes take on a so-called bad credit mortgage more readily than a big bank.
In order to qualify you may need to save up a larger down payment, and you may be asked to co-sign your mortgage with someone who has a high credit score.
If you’re worried about your credit score, and wish to own a house, avoid taking on more debt, and start saving up for your down payment. Then reach out to HW Advantage for help.
HW Advantage – Mortgages Made Easy
Why would you do all the work of searching for the best mortgage rates, when HW Advantage can do it for you? Mortgage brokers don’t charge for their service, they get paid by the lending institution. That means we make money by getting the best mortgage for you – the one that helps you pay your mortgage down faster, while preserving your financial well-being. Our success is based on client satisfaction. Period.
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