A bad credit score can stop you from getting a mortgage with a traditional bank or Credit Union. These lenders put a high value on this three-digit number. For example, TD Bank reports that a good credit score is between 660 and 724, according to Equifax.
The good news is bad credit mortgages in North York and other places are available through private lenders. These alternative lenders focus on different metrics like equity and what’s called a loan-to-value (LTV) ratio.
Understanding North York will help you to see why getting a mortgage there is a good idea.
Why Bad Credit Mortgage Lenders Favour North York
The current real estate trends in North York paint a favourable picture for bad credit mortgage lenders. Toronto MLS® stats for September 2023 highlight 4,446 new listings in the last 28 days in the Toronto category, which includes North York. The average house price is $1,015,981, and the median number of days for a house on the market is twenty-one. Those numbers combined to represent a positive yearly change of 0.5%.
According to the rating website AreaVibes.com, North York is an excellent place to live, with many different amenities, lots of entertainment and good transportation. Overall, it has a livability score of 80, which is considered exceptional. All these factors make North York a favourable place to provide these types of mortgages in.
Using your credit score when you’re applying for a mortgage means understanding how the rating agencies arrived at your numbers. One of the first steps is ensuring the credit agency information is accurate.
Verifying Your Credit Score
You must only follow a few simple steps to check your credit score. However, it’s important to remember that credit reports don’t always contain credit scores. You can buy credit scores from either TransUnion or Equifax. Plus, you can get your score free from some credit unions and banks.
Along with your credit scores, it’s a good idea to check your credit reports to make sure the information is both accurate and thorough.
Once you verify the numbers, it’s possible to proceed with bad credit mortgages in North York through a private lender. Still, it’s a good idea to fix what’s wrong.
Improving Your Credit Score
Here’s some solid advice on how to improve your numbers:
- Start making your payments on time if you’re not already doing it. If you can’t pay the full amount right away, make at least a minimum payment. Contact the lender immediately if you think you’re going to need help paying a bill by the deadline.
- Being smart with your credit will help to improve your credit score. Staying within your limit on credit cards and other types of loans will help. Another good idea is to use less than 35% of the credit you have available.
- The longer that you have an existing credit account that is open, the better for your credit score in the long run. Consider keeping an old account open even if you’re not using it on a regular basis. Check to make sure there’s no fee involved for these kinds of accounts.
Finally, inquiries made on your credit score are known as credit checks. Too many of these warn potential lenders that you’re desperate to find credit and might be living beyond your means. If you’re shopping for a loan for a car or a mortgage, try to get quotes from different lenders within a 14-day period.
Requirements for Bad Credit Mortgages in North York
The companies that specialize in private mortgage lending options are generally called C lenders. These C lenders can evaluate different criteria and are able to overlook specific credit issues.
Private Lenders are like banks in one crucial way. They look to mitigate the risk when they are considering applications. However, their criteria are more lenient and include the following:
- The amount of equity that a homeowner has in their home.
- The appraised value of the property and the location.
- The overall condition is also essential.
- Private lenders use a metric that’s called the loan-to-value (LTV) ratio.
Generally, private lenders will accept the LTV at no higher than 75% of the appraised value of any home or property. Here’s an explanation.
The calculation is simple. Lenders take the total value of the loan and divide it by the property’s appraised value to get this number. Private lenders place significant emphasis on the LTV to gauge risk. The lower the LTV, the lower the risk for these alternative lenders.
Fee and Rates for Bad Credit Mortgages
It’s essential for applicants to remember that these mortgages are high-risk. That’s why the lenders need to ask for higher fees and rates. How different they are from more traditional Banks and Credit Unions numbers depends on the LTV ratio.
The fees can also depend on other factors, like how complicated the mortgage itself is. There might be legal issues to deal with, which can add to these costs. The approval, including the fees and rates, also depends on where the property is located. The general rule is that bigger cities have higher maximum LTV numbers.
The Importance of a Home Appraisal
Applicants should be aware of the importance of the home appraisal, too. Preparing the property first can make a big difference. For example, it’s a good idea to list any improvements and renovations that have been made within the last 15 years. Make sure to add completion dates and costs. If you have any home inspection reports, add those in.
Doing pre-appraisal work can help you if you’re looking for bad credit mortgages in North York. Don’t ignore poor credit score numbers. It’s always in your best interest to try and bring them up.
Need Help Getting a Bad Credit Mortgage?
Credit issues don’t need to stop you from attaining your financial goals. Mortgage Broker Store is a private mortgage lender in North York that can help you with a bad credit mortgage. We serve several locations in the GTA. That includes locations like Oshawa, Richmond Hill, and Scarborough. Call 416-499-2122 or email ron@mortgagebrokerstore.com for some free advice. Our team has 34 years of experience.