While many brick-and-mortar banks in Canada consider people with bad credit to be risky, there are many lenders who are willing to extend credit to clients, regardless of their credit score and payment history. You can apply online and get connected with a bad credit mortgage lender in your area. These lenders generally consider factors such as income range, type of job and whether the applicant is actually a first-time buyer. These lenders specialise in taking on clients that are turned away by banks and can provide bad credit mortgages in Barrie.
You have the option to apply for mortgages that have been specifically designed for people with bad credit score. One of the biggest factors that lenders consider is equity in the subject property. Lenders want to make sure that they can sell the home in the case of non-payment and recover their investment. Lenders of bad credit mortgages also require much higher down payment because they’re dealing with a risky client. Bad credit mortgage comes at a higher interest rate than bank loans.
Customers with a lot of equity will get a loan on competitive terms. If you have a low equity, you may have to put 20-22 percent down. The higher the down payment, better would be your chances to get approved for a bad credit mortgage loan. Sometimes a co-signer is required as well.
Since down payment you will make is actually a certain percentage of the property’s value, you would want to set an upper limit on the payment you can actually afford. Here your Loan to Value ratio is very important, and a high LTV shows that the lender may lose their investment.
You also need to factor in your housing expenses and costs such as condominiums, cooperative, or homeowners, hazard insurance, association fees, property taxes, principal amount, and interest charges. Lenders will also look at your total monthly income. They quickly factor in the recurring payments such as child support and alimony, consumer and student instalment loans, credit cards, vehicle leases and other loans.
Credit score helps lender assess the credit risk. This number depends on credit accounts and credit history of a person. It ranges between 350 and 900. Higher this number, easier it is for you to get credit. It depends on many factors such as non-payments, late payments, current debt, history of applying for credit, types of credit accounts, and inquiries on credit report.
It’s ok if you have a credit score higher than 650, but anything between 610 and 650 makes lenders cautious. So you may then have to submit additional documents. If your number is below 600, you will have to apply for a bad credit mortgage, which comes easily but at a higher interest rate.
If you have a low credit score, you need to do everything possible to raise it. Check if you have some issues on your credit cards that you may not be aware of. Order your free credit reports from Equifax and TransUnion and check if it has some errors. You can dispute them and get them removed. That would automatically raise your credit score.
You can improve your credit score in a number of ways, such as paying bills on time, keeping a low balance on your credit cards, avoiding opening credit cards that are not required, and having few instalments loans that are being regularly paid also raises your credit score.
You can contact mortgage brokers to get a bad credit mortgage loan. They maintain close contact with many banks and lenders and can save you valuable time and money. Many lenders work exclusively with brokers and have access to a huge pool of borrowing solutions. A mortgage broker will work as intermediaries between you and lender. They will help you identify the best lender based on your credit profile and loan requirement.