Banks make their lending decisions based on an individual’s credit status to save them the trouble of trying to recoup after default. Banks fear risk posed by people with poor credit so much that they would rather deny them a chance at a mortgage from them. Credit unions are quite flexible considering that they only need you to have a score of 550 to qualify you for a mortgage. Private lenders move in to fill in this gap, thereby giving people a chance to access the equity in their homes. We have a network of private lenders offering bad credit mortgages in Cobourg.
Credit Scores Needed by Different Lenders
- Banks need 600 points or more
- Trust unions will ask for 550 points
- Private lenders do not need your credit score
How to Check Your Credit Score
Credit worth is measured by a score calculated by credit reference bureaus in many parts of the world. In Canada, that is the duty of Equifax and Transunion, who are in charge of everyone’s credit report. Banks and institutional lenders can get your credit score whenever you apply for a mortgage or other form of credit. This helps them assess how much of a risk you are to decide whether to give you the mortgage or dismiss your request. You should visit the websites of any credit union to request your credit score and know whether you are worthy of credit from banks, credit unions or private lenders? Our brokerage also does credit reporting so feel free to ask us for a copy at any time.
Bad Credit Lenders in Cobourg
People have bad credit for many reasons including bankruptcy and consumer proposals. Failure to repay debts often leads to a negative score, which prevents people from accessing affordable mortgages. Private lenders are more lenient than banks, offering loans to people with bad credit. They will accept almost any explanation for needing the loan as long as they find value in your property.
Criteria for Bad Credit Mortgage Approval
It has already been established that private lenders do not mind how many credit score points you have. As long as there is enough equity in your home, a private lender will extend credit but first, they have to calculate its loan to value ratio. The LTV of a home is calculated by dividing the total debts against it by its most current selling price. The result must be below 75% for private lenders to help you out, as they must also try to make profits.
Fees and Rates
While banks charge 3%-4% interest, bad credit lender mortgages in Cobourg are offered at 7%-15%. This is because bad credit mortgage seekers often have poor credit scores owing to serial defaulting of loans and other bad credit habits. There is no telling when such a client will be unable to repay, making it wise to at least recover the investment using high interest rates and fees. To get a bad credit mortgage in Cobourg you must be ready to pay the legal fees, home appraisal fees and other charges associated with setting up the mortgage. You may be able to negotiate better interest rates if you have a high annual income. Shop around to find the most suitable offers as private lenders charge different rates on mortgages. We have several of them in our networks and we could help you out by sending over multiple quotes for you to choose from.
How to Improve Your Credit Score
Monthly bills, credit card debt and mortgages must be repaid in full, on time as agreed otherwise you will get a poor score. Develop good credit habits that will lead to a better score desired by all lenders in the market. Make sure you repay credit card debt before they are overdue and remember to pay other bills on time. Lenders report your performance to the credit reporting agencies who calculate your score and you must make every effort to keep it up. A secured credit card is considered to be the best way of protecting oneself. When you request for a secured card your bank will require you to make a deposit. This amount will be used to repay your debt when overdue payments are produced. You should never exceed the 60% limit on your secured card, as the deposit needs to cover interest accrued. If you keep up the good efforts you credit score will certainly increase after 6 months.