- Introduction
- How to check your credit score
- Credit Score Requirements By Lender
- Requirements for Bad Credit Mortgage Approval
- What Interest Rates and Fees are Associated with Private Mortgages?
- How to Improve Your Credit Score to Get Bad Credit Mortgages in Waterloo
- Mortgage Broker Store Will be able to Help Guide You In Private Loan Options
Waterloo is a picturesque city located approximately 94 km southwest of Toronto. With a population of 104,986 and home to one of the world’s leading universities, the University of Waterloo, the city offers an envied lifestyle for its residents.
Along with being a desired location to live and raise a family, Waterloo is a great palace to grow your wealth in real estate. Homeowners have enjoyed a housing boom similar to other cities across the country. Demand for mortgages is up as sales have skyrocketed in the Waterloo region over the last year despite the pandemic negatively impacting other areas of the Canadian economy.
According to the Kitchener-Waterloo Association of Realtors, the region saw a 27.8% increase in house sales in February of this year from the same time in February 2020 and up 66.7% from January 2021, making February a record-breaking month for home sales.
The average sale price of all residential properties sold in the Waterloo region increased by 32.1% from this time last year up to $752,289 and for the first time, the average price for a detached home surpassed the $900,000 price point.
When applying for a mortgage loan the majority of Waterloo homeowners may turn to the banks despite there being other lending alternatives available. The banks, however, have imposed very rigid stress tests for those seeking mortgage financing. Preference is given to those that have exemplary credit scores (over 600) and can easily prove full-time monthly income or substantial assets to leverage a mortgage loan against.
For those that may be turned away from the banks because of poor credit, private lenders are well-established in Ontario and the Waterloo region. Mortgage Broker Store is in a position to help those Waterloo homeowners who are seeking mortgage financing despite damaged credit. Private lenders will not require the same credit score as the banks or credit unions
How to check your credit score
Whether you are looking to get a loan or not, you should be aware of your credit score and familiar with what is reported in your credit history. In Canada, there are two major credit reporting agencies, Equifax and Transunion. They are private agencies that gather financial information about the borrowing habits of consumers and calculate their credit scores. Credit bureaus sell this information to lenders when borrowers request loans.
Each bureau will allow you to obtain a free copy of your credit score from their website. At Mortgage Broker Store, we can also offer free credit score copies upon request.
Credit Score Requirements By Lender
- Banks require a credit score of 600 and above to be eligible for loan approval.
- Trust Companies and credit unions require a credit score of 550 and above to be approved for a mortgage loan.
- Private lenders do not have any credit score requirements when deciding on whether or not to approve loans.
If your credit score is not high enough to get approved by banks, you can work with a private lender to get the funds you need. They can approve mortgages to borrower with poor credit scores, otherwise known as bad credit mortgages. Keep reading to learn about the requirements for getting a bad credit mortgage in Waterloo.
Requirements for Bad Credit Mortgage Approval
While banks rely heavily on creditworthiness, a private lender can look to different criteria to approve a mortgage loan. A private lender is looking to the appraised value of your home which is why you will need to bring with you a recent appraisal when you sit down with a Waterloo private lender. You will also need to provide a list of current assets, all sources of monthly income, and an estimate of the existing equity in your home to process a private mortgage loan.
When negotiating a mortgage loan with a private lender he/she will assess the Loan to Value (LTV) of your home which is simply the total mortgage value divided by the property’s value. Most private lenders will not exceed an LTV of 75% ( which is a loan with more than 75% of the appraised value of your home). A private lender will also be looking to see that you have at least 25% equity existing in your home.
Generally, the lower your household debt ratio, the less risky a private lender will deem a mortgage loan. It is important to try to pay down the best you can existing household debt when seeking mortgage loan approval. Although private lenders can overlook outstanding debts, it is more favorable to manage these debts before application.
What Interest Rates and Fees are Associated with Private Mortgages?
There is no better time to try to obtain bad credit mortgages in waterloo. Mortgage interest rates are at an all-time low. Some lenders can negotiate mortgage loans with rates under 2%. These rates, however, apply to those that have near-perfect credit and substantial household income. For the most part, it is the banks offering these rates currently.
While able to offer mortgage financing to those that have not met the stringent criteria demanded by the banks, private lenders will tend to charge higher interest rates on mortgage loans. The loans are often short-term (1 to 3) years generally and the fees attached to the loans will be higher than those charged by their bank counterparts.
Most private Waterloo lenders will charge between 7% and 15% interest rates on mortgage loans and fees will generally range between 3% to 6% of the overall cost of the loan. These fees include administrative fees, legal fees, and the cost of a home appraisal.
Private lenders can offer different types of mortgage loans including home equity loans, home renovation loans, Home Equity Lines of Credit (HELOC), second mortgages, and cash-out mortgage refinancing. The existing equity in your home and the LTV will be assessed for each loan type.
How to Improve Your Credit Score to Get Bad Credit Mortgages in Waterloo
Although a private lender may be able to overlook bad credit, it is advisable to consistently work towards improving your credit score. Easy ways to do this include:
- Pay your credit cards on time: Even one late payment can negatively affect your credit score.
- Try not to max out your credit: As a general rule of thumb, it is best not to exceed 60% of your available credit.
- Pay all your bills on time: Billers may report late payments to the credit reporting agencies which will negatively impact your credit score.
- Take out a second mortgage: If you can manage the loan, taking out a second mortgage will help improve your credit score. By paying your mortgage reliably every month you can build a responsible and positive credit history which will enable you to negotiate better terms on future loans.
Mortgage Broker Store Will be able to Help Guide You In Private Loan Options
At Mortgage Broker Store we have amassed a vast network of private lenders in Waterloo and across Ontario throughout our many years in the province’s real estate industry. We can help you find suitable lenders who can help you get the best private mortgage loan based on the appraised value of your home and your home equity.
When credit problems have prevented you from reaching your mortgage goals, we will be able to sit down with you and discuss relevant options open to you and direct you to private lenders in your area to obtain mortgage financing.