So you experienced financial setbacks, but now you are on the right track. However, your bank keeps turning down your mortgage loan applications because of your pesky credit history. All Canadian banks and credit unions approve mortgages only after they review and verify that a client’s credit score is high enough, (550 or greater). If you have a low credit score, it’s obvious that you can’t get a mortgage from the top lenders. But you shouldn’t be worried since some individuals/ institutions offer bad credit lending, and we are here to help you find bad credit mortgage lenders in Peterborough.
What Are the Credit Scores Required By Different Lenders?
• Major bank- Prime lenders want to see a credit score of 600-900
• Trust companies-Bad Credit Institutional Lenders look for credit scores of 550-700
• Private lenders accept any credit scores, but they mostly serve clients with a rating that’s less than 600.
How To Check Your Credit Score
If you have ever borrowed money to buy a house/ car or applied for a credit card/ any other personal loan, you are free to access your credit score. In Canada, credit scores are generated by two credit bureaus, Equifax and the TransUnion. Your score ranges from 300 to 900 and shows lenders how you have been dealing with credit in the past years. To obtain a copy of your credit report, you can visit the official websites of any of the two credit bureaus. Alternatively, you can always contact us, and let our brokerage pull your credit score. We will then provide you with a copy.
Private Lenders for Bad Credit Mortgages in Peterborough
When you receive a copy of your credit score and realise that your score is less than 550, private lenders can help you get a bad credit mortgage. These are individuals/companies that offer loan funds that are backed by real estate properties, specialising in people who don’t have ideal credit scores. We have a network of private bad credit lenders in Peterborough who can provide you with bad credit mortgages regardless of your credit score.
Requirements for Private Lender Mortgages
The most important factor that determines whether a private lender will approve or reject a bad credit mortgage is your property type, its value and existing debts on the property. The mortgaged property has to be in good condition, and the existing debts shouldn’t be too much. A strict appraisal is always performed before a client can be approved. Once the lenders create a mortgage agreement, they have the right to sell the house if you refuse to make the mortgage payments. Once a property is sold, the lender will first pay off the previous mortgage holder and then reclaim their money.
When determining the down payments, the private lender will have to judge the risk of your property by calculating its Loan to Value (LTV). This is done by dividing the value of your existing secured debts by the approximate selling price of the property. Peterborough’s bad credit mortgage lenders lend on properties with minimum LTV ratio of 75%. This means that you’ll have to make a down payment of at least 15% to be approved. If you can make a higher down payment, you should do so. Private lenders take this as a sign that you’re able to keep track of your personal finances.
Interest Rates and Fees for Bad Credit Mortgages
Bad credit mortgage rates range from 8% to 15%, higher than the bank rates which range from 3% to 4%. You’ll agree that private lending is a risky investment and have to carry higher interest rates compared to bank mortgages rates. As a client, you’ll also pay additional fees for setting up the mortgage, such as the administrative fee paid to the lender and their lawyers, property appraisal fees, etc.
The good news is that all these charges can always be financed through the mortgage loan. To get the best deal, we recommend that you contact multiple lenders offering bad credit mortgages and then review their rates. We have a network of Peterborough private lenders, and you can be sure that we’ll send you multiple quotes from different lenders so that you can make your selection with ease.
How To Repair Your Credit Score
If your score isn’t as high as you expected, you should first verify whether all the information on your credit score report is correct or not. If it’s correct, go through the report and identify the factors that are most likely to affect your score in a negative way. You then need to start working on how to improve them. The only way to repair your credit score is to adopt good credit practices which includes;
- Paying your bills/ credit cards on time
- Making payments as quickly as possible (before the due date).
- Paying bills in full or paying at least the minimum required amount before the due date.
- Reducing the number of credit card applications.
- You shouldn’t go over the credit limit on your credit card.
- Ensuring that you have a credit history so as to avoid low scores due to lack of credit history.