In order to approve mortgage requests, institutional lenders like banks want to see a credit rating of 600 points or more. This is to convince them that you have a habit of repaying debts in full and on time. They feel more secure when working with people with good credit scores, but unfortunately, the stringent measures often leave other loan seekers out in the cold. All hope is not lost, though, as there are companies and individuals willing to overlook poor ratings. We have a wide network of private lenders offering bad credit mortgages in Welland and other parts of Ontario.
Credit scores required by different lenders
- As mentioned earlier, banks need to see scores of 600 or above
- With 550 points, you can approach credit unions for a mortgage
- Private lenders will approve loans without considering the score
Private Lenders Offering Bad Credit Mortgages in Welland
The breakdown of scores by different lenders clearly shows that private lenders are the only resort for people with low credit scores. Welland bad credit mortgage lenders are not concerned about bankruptcy or consumer proposals, nor will they look at your credit score to decide whether you qualify for a mortgage. We work with private lenders in Welland who offer products for those not qualifying for bank mortgages.
Requirements for Bad Credit Mortgages
Bad credit mortgage lenders may overlook credit scores, but there are still rules guiding approval in the city. Private lenders face high default risk due to clients’ bad credit habits. They must, therefore, avoid giving loans to people with overwhelming debt against the property in question. According to the Mortgage Act, first lenders must be paid before second mortgage lenders if a property is sold.
To ascertain just how much a borrower owns, private lenders must calculate Loan-to-Value ratio (LTV). This is done by dividing the total debts by the current price of a property to get a result that should ideally be below 75%. Owning a small property share may deter lenders, but steady income and good credit scores could attract favourable private rates.
Fees and Rates for Bad Credit Mortgages
Lenders are very wary about bad credit mortgages which clearly explains why they charge high interest rates on loans. You will get a mortgage at 8% to 14% interest, which is a huge difference compared to banks offering similar products to people with good credit at 2.7% to 4%. The customer also has to pay the home appraisers, lawyers and administrative fees required to set up a mortgage. They do this to protect against losses, but Ontario’s vastness means you might find lenders offering ideal rates for your situation. We’ve curated a list of private lenders offering bad credit mortgage loans in Welland and beyond to simplify your search. We can provide clients with multiple quotes from various lenders to help them choose and start the mortgage process.
We also provide mortgages in Pelham, Fort Erie, Port Colborne, Fonthill, Crystal Beach and Ridgeway Ontario.
Gradually Improve Your Credit Score
Credit scores improve for those who borrow and repay loans on time, in full, and without breaching terms. Credit cards are a great tool in building credit history, being one of the most common forms of credit. Developing habits like charging small purchases ensures you can easily pay off debt when needed. Alternatively, use a secured card to maintain your score, even if you’re late on loan payments.
When you approach leading banks in Canada for a secured credit card, they will ask you to make a deposit. The intention is to use that amount to cover your purchases when you forget but you must never exceed the 60% limit. It is also advisable to clear all charges on a secured card before the deadline. If you keep up with this, it will only take 6 months for your credit report shows a higher score.