Most banks that operate in Canada have strict credit score requirements for their mortgage approvals. The absolute minimum credit score needed to qualify for a mortgage is 550. Our brokerage specialises in providing bad credit mortgages in Vaughan from our private lender network.
Credit Score Requirements for Different Lenders
The majority of Canadian banks require a high credit score when approving mortgage applications. Without a credit score of at least 550, banks and credit unions will not approve a mortgage. We specialise in providing our clients with bad credit mortgages in Vaughan from private lenders.
Most lenders will retrieve a copy of your credit report from the credit bureaus Equifax and TransUnion. Our team can also retrieve copies of credit score reports, and we can give your report to you for free. You can also get your credit score directly from Equifax or TransUnion by signing up on their websites. Credit scores are typically low for people who don’t pay their bills, take more debt than they can pay, or undergo a consumer proposal or bankruptcy.
Many mortgage lenders such as banks can produce copies of your credit score that are generated by Equifax and TransUnion. Our mortgage brokers can make copies of your credit report and we can provide it on request, free of charge. Another option is to get a copy from TransUnion or Equifax by submitting the request forms on their website. Your credit score is likely to be poor if you don’t pay your bills, go through bankruptcy or consumer proposal, or are generally overwhelmed with debt.
If you have a credit score below 550, your only option is to get a bad credit mortgage in Vaughan from a private lender. Vaughan’s private lenders can approve mortgages with any credit score. They also service people who have undergone bankruptcy and consumer proposal. Our brokerage has built a network of private lenders in Vaughan which we use to get mortgages for our clients.
Lenders for private mortgages look at existing mortgages on your home and the predicted selling price of your home. Private lenders will not lend on homes that have mortgages amounts that are nearly as high as the value of the property. The Ontario Mortgages Act allows lenders that hold mortgages to sell the property if payments are not made. When a property is sold, the lender must first pay out existing mortgages then they may recover their investment. To evaluate the risk of a mortgage deal, lenders will calculate the Loan to Value (LTV) of the home. The LTV is calculated by dividing the value of existing mortgages by the value of the home. Private mortgage lenders can provide mortgages for homes with a LTV no greater than 80%. High incomes and higher credit scores may help you negotiate lower interest rates but are not needed to be approved.
Most banks mortgages have lower interest rates than private lender mortgages. Lenders charge higher interest rates because they are willing to take on the riskier mortgages that the banks reject. Banks offer interest rates ranging from 3% to 4% and private lenders offer rates ranging from 7% to 15%. Private mortgage lenders also charge initial fees in order to get the mortgage set up. Private lenders need to pay their lawyers, their own staff for administering the mortgage, and an appraiser to get a predicted value of the property. Comparison shopping with many different lenders will help you get a better deal. Our team can help you get several quotes from lenders in our network.
Credit scores can be increased by paying off all bills and credit cards on time each month. Taking on small amounts of debt makes it easier to make all payments. You can put only small charges to pay off on your credit card, or you can obtain a secured credit card from your bank. Secured credit cards allow you to safely improve your credit and can be obtained at most banks. For secured credit cards, an initial deposit is needed and this deposit is used when the card’s fees are not paid. It is generally recommended to stay below 60% of the card’s credit limit. Your credit score will improve after payments are made for a minimum of six months.