Private lenders supply an alternative to more traditional bank loans. In Ontario, most lenders rely on credit reports from a company called Equifax. These credit reports will provide a value between 300-900 that measures how good a person is at paying their debts. Quite often, the people who take this route have bad credit that’s defined by a credit score somewhere between 300-579. Credit scores differ depending on the scoring model used, but that range is used as a benchmark quite often. For those seeking bad credit mortgages in Newmarket, understanding these scores is crucial.
Mortgage Broker Store offers bad credit mortgages in Newmarket. The criteria used for these are more lenient than the stricter requirements for conventional loans. Read on to find out everything you need to know about this alternative type of financing.
How Is a Bad Credit Mortgage Different?
Traditional loans place emphasis on your credit score. They also factor in several other criteria, like your employment history and income. Many traditional employers like to see two years’ worth of job history with the same company or employer. Generally, there are also two rules that conventional lenders use to approve or reject an application. Your housing costs and your total debt. Follow this link to some formulas provided by the CMHC.
A bad credit mortgage in Newmarket through a private lender takes on a different approach.
They look at several different factors including the appraised value of any property. The current condition and location of the home and the degree of existing equity are also considered. The loan-to-value ratio (LTV) is also important. Many private lenders will lend up to 75% of this number.
It’s a simple calculation made by taking the total amount of the loan and dividing it by the appraised value of the property.
The LTV is an important factor when a private lender is looking at approving a loan. The LTV of a proposed mortgage is the primary way alternative lenders measure risk. The lower the LTV the lower the risk, and LTVs exceeding 75% are considered too risky for most lenders.
Understanding Your Credit Score
A poor credit score doesn’t stand in the way of being approved for bad credit mortgages in Newmarket. However, this three-digit number is an important part of your financial well-being.
This score is a snapshot of the kind of risk that you present to lenders. It helps to decide whether you get a mortgage and other types of credit and the rates that you pay. Several things can damage this number like even one late payment or carrying high balances. Hard inquiries can highlight when you apply for several credit accounts in a short time.
A poor credit score is a number between 300 to 579 according to Equifax. Improving this number is always a good idea regardless of your financial plans concerning credit.
Top Ways to Improve Your Credit Rating
Establishing a positive score takes patience and effort, but it can be done. It’s important to remember that there’s no one-size-fits-all solution. However, most credit scoring models consider the following aspects:
- The credit utilization rate. This is the total amount of revolving credit you have at your disposal or are using divided by what’s available. Lenders generally like to see this rate at the low 30%.
- The amount you owe on balances like lines of credit can make a difference. The best-case scenario is paying off all balances every month.
- Your payment history is also something you should consider when you’re trying to fix a credit score. It shows how consistently you pay all of your bills. Missed or late payments can have a big effect.
Reviewing your credit reports is another step that you should take. Look for inaccuracies as well as signs of fraud and theft. Try not to close off any old accounts that have been paid off and limit applying for new ones.
It’s important to keep in mind that late payments can stay on a credit report for as long as seven years. A Chapter 7 bankruptcy can affect your credit score for up to a decade.
Bad Credit Mortgage in Newmarket—Is It a Good Idea?
If you have credit issues that prevent you from getting a loan from a more traditional source, a bad credit mortgage in Newmarket is a good solution. Here’s why.
- The approval guidelines for these loans are more flexible than with conventional banks and financial institutions. Their regulations dictate applicants need to have a good credit score.
- Private lenders can generally supply the money faster. Other more conventional requirements are subject to more stringent provincial and federal regulations.
- If you’re looking to rebuild your credit score with a punctual payment history, a bad credit mortgage in Newmarket can be a beginning.
Remember, credit issues don’t need to stop you from realizing your financial goals. Mortgage Broker Store is a private mortgage lender in Newmarket that can help you with a bad credit mortgage. We serve several locations in the GTA. That includes locations like Oshawa, Richmond Hill, Scarborough and North York.