Large institutional lenders such as banks need a high credit in order to provide a mortgage. For people with credit scores below 550, getting a bank mortgage will not be possible. We help people find private lenders that offer bad credit mortgages in Hamilton.
The Different Scores Needed By Different Lenders
Banks and other registered lenders can access credit scores that are generated by the Canadian credit bureaus: TransUnion and Equifax. Our mortgage brokers are registered to pull credit reports and we provide free copies to clients. You can also request a copy of your credit score directly from the websites for TransUnion and Equifax. If you’ve failed to pay bills, have too much debt in general or have gone through bankruptcy or consumer proposal, then you will have a low or poor credit score.
If your credit score reports show that you have a score of less than 550 you will need a bad credit mortgage in Hamilton from a private lender. These private lenders can provide a mortgage regardless of credit score. Banks will also refuse to provide mortgages for people who have gone through consumer proposal or bankruptcy. We have connections with many private lenders and have been able to service many clients seeking bad credit home loans in Hamilton.
For the purposes of approving a mortgage, a private lender will look at the home equity and secured mortgages on a property. To reduce the risk associated with bad credit mortgages, lenders will reject properties that have too much existing debt. By setting up the loans as registered mortgages a lender is legally able to sell the subject property if mortgage fees are not paid. When a lender sells a property they may recoup their money after all pre-existing mortgages have been paid off. To determine if a mortgage is too risky, lenders will calculate the Loan to Value (LTV) of the property. LTV is calculated by taking the existing mortgages on a property and dividing them by the predicted selling price of the property. For the city of Hamilton, bad credit lenders are willing to give mortgages on properties that do not exceed 80% LTV. People with a better credit score or a high income may be able to negotiate lower interest rates, but these factors will not help a mortgage applicant get approved.
Lenders providing bad credit mortgages will charge larger interest rates than banks since a bad credit mortgage is a risky investment. Most Canadian banks will charge interest rates of 3% to 4% and most private lenders will charge rates between 7% and 15%. Private lenders will also ask for payment upfront in order to set up the mortgage. Fees must be paid to the lenders for administering the mortgage, the real estate lawyers, and the home appraisal company. It is recommended to ask for quotes from several private lenders and compare their offers. Our brokerage has connections with many lenders that service Hamilton and can provide you with several offers from different lenders.
In order to fix your credit score, you must pay off bills and credit cards on time. Not taking on too much debt will reduce the interest payments you make and allow you to easily pay the debt off. To quickly improve your credit score you need to pay off all the monthly charges on your credit card. If you only place small charges on the card it will be easy to pay off, alternatively you can sign up at a bank for a secured credit card.
Secured credit cards are offered at all big Canadian banks. To get a secured credit card you must pay a deposit which will be used if you do not make payments on the card. By not exceeding 60% of the card’s credit limit you can minimize your chances of failing to make payments on the card. If you consistently pay off all credit card fees, your credit score will improve in six months’ time. You can also ask your bad credit mortgage broker for suggestions to improve your credit score.
Many people have a difficult time qualifying for a mortgage with bad credit. A bad credit mortgage broker can help a person improve a poor or low credit score. You should also ask is there another house or property that can be used as collateral or is there a person that will co-sign the mortgage for you. The best method to qualify for is to try all of the options, there are also some free credit counselling services that may be able to help.