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 in 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 earlier mentioned, 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, neither will they look at your credit score to decide whether you qualify for a mortgage. We work with a team of such private lenders in Welland who can provide such products to those who do not qualify for bank mortgages.
Requirements for Bad Credit Mortgages
Bad credit mortgage lenders in the city may not focus much on credit score but there are rules that dictate approval. Private lenders must contend with the fact that clients have bad credit habits and there is a high risk of default. They must, therefore, avoid giving loans to people with overwhelming debt against the property in question. According to the mortgage act, in the event that a property is sold to recover money lent, the first lenders must be compensated before a second mortgage lender can recoup their money.
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 with the current price of a property to get a result that should ideally be below 75%. Anything above that shows a potential lender that you own a very small portion of your property and it wouldn’t be practical to lend you funds. You might get good interest rates from private lenders if you have a steady income and credit scores that are not too low.
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 8-15% interest which is a huge difference compared to banks offering similar products to people with good credit at 2.7-4%. The customer also has to pay the home appraisers, lawyers and administrative fees required to set up a mortgage. They do this to cushion themselves from losses but given the vastness of Ontario, you might find a lender offering loans at ideal rates depending on your situation. To make your search easier we have selected a large number of private lenders offering bad credit mortgage loans in Welland and beyond. Drawing from this pool, we can send clients many quotes from different lenders so that they can choose and get started with the mortgage process.
Gradually Improve Your Credit Score
Credit score improves only for people who borrow and pay back loans on time, in full without breaching any terms. Credit cards are a great tool in building credit history being one of the most common forms of credit. Developing good habits like charging small purchases when necessary is essential as it means that when time comes you will easily pay off your debt. Alternatively, you can resort to a secured card which will save your score even if you are late to make good on your loan.
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.