Banks and credit unions have strict credit score requirements before they can approve a mortgage application. To get a bank loan you need to present credit score of 600 or more points. Institutional lenders do not loan below 550 points so people are left to find bad credit mortgages. It is our job to help you get our clients bad credit mortgages in Etobicoke from private lenders after being rejected by banks.
- Credit Score Requirements by various lenders
- Credit Unions need more than 550 credit score points
- Bad credit lenders do not need your credit score
How to Verify Your Credit Score
Banks are able to get your credit score directly from the major credit bureaus; TransUnion and Equifax. We can also pull your credit score and get it to you free but you can also get it by visiting the credit bureau website of choice. If you never pay bills, take too many loans or have faced bankruptcy, it is likely that you will have a poor credit score.
Private Lenders of Bad Credit Mortgages in Etobicoke
If your credit score reads any number below 550, you can only get a loan from private lenders who are not as mindful of credit as banks are. You will not get a bank loan if you faced bankruptcy in the last two years or have a poor score but these do not deter private lenders. We have a network of private bad credit lenders in Etobicoke and other neighbourhoods in Toronto.
Requirements for Bad Credit Mortgages
Private lenders consider debts on a property and not credit score when considering loan applications. There is a big risk in lending to clients with bad credit and they avoid loaning to a property with very heavy debts. Private lenders prefer writing a mortgage agreement that gives them the power to sell any property in default. If this happens, the bad credit lender must wait for initial and subsequent lenders to recoup first.
To really tell how much of risk is on a property, the lenders must calculate loan to value ratio. This metric is calculated by dividing total value of debts on a home by its appraised price. Bad credit lenders usually loan up to 75% LTV on a property. Our bad credit lenders in North York are ready to negotiate rates and terms with high income and better credit clients even if those are not mandatory.
Interest and Fees Charged for a Bad Credit Mortgage
This is a high-risk investment considering that clients already have negative credit history. This is why lenders choose to charge high-interest rates compared with institutional lenders. Private lenders offer loans at 7%-15% interest while banks will only demand 3%-4% as interest on a mortgage. For a private deal, you must also pay the fees associated with setting up the mortgage. The money is required upfront to pay real estate lawyers, appraisal, and other professionals needed to set up the mortgage. You can only get the best deal if you compare. Luckily, we have many bad credit mortgage lenders in our network and can send several quotes over to you.
How to Improve a Poor Credit Score
An improved credit score is only possible if you make a habit of paying bills and credit card debt. Credit cards can come in handy in improving your score but only if you are able to pay on time and in full. Make only small charges to your credit card, as it is easy to make small monthly payments. You can also improve your credit score using a secured credit card issued by banks.
All the leading banks in Canada can issue their customers with a secured credit card. To get one you must pay a deposit which acts as security for your credit card debt. If you miss payments, the charges will be made to the secured card to save you from a bad credit score. Do not exceed the 60% limit on a secured card and make sure that you pay the debt upon remembering. Good credit is the only way to get low interest rates on mortgages and it takes about 6 months to a bad score to improve.