How to Get a Mortgage with Bad Credit

How to get a mortgage with bad credit? Many Canadians face credit problems when life throws obstacles, whether having an illness, losing a job, going through a divorce, a major catastrophe, or simply the lack of financial and credit use education. 

Not paying a cell phone bill on time, regularly, is a simple example of how credit can tank. Keeping a credit balance higher than 50% on credit cards is another example of how credit scores can go bad.

Then, not having enough credit accounts open and with some history is another example that can cause low credit scores. 

It may take a few times to get on the right track to higher credit scores. In the meantime, delaying buying a home might be the best option. With higher credit scores, better mortgage rates and mortgage options become available.

Bad credit mortgage loans and several other lending products are available to help Canadians avoid spending a lifetime of renting and start building an asset that can build equity $$$ while they sleep. .

A bad credit mortgage is a type of home loan offered to consumers that have found themselves in financial trouble. Bad credit loans allow you to borrow money on your credit score as long as you qualify for the loan. 

Bad credit means falling into three categories: high risk, no credit, or weak or doubtful (although there is no official term). Typically, they require borrowers to have a stable income to pay regular payments on time. 

Here are three simple steps on how to get a mortgage with bad credit:

  1. Boost your credit score
  2. Save up for a higher down payment
  3. Find a mortgage lender for people with bad credit

1. Boost your credit score

Boosting your credit score takes time, but it could also take less time than one might expect. The first step is to know your credit score and understand what is on your credit report. Several big banks can provide you with your updated credit score. Just ask.

You can also register, for free, to Borrowell or Credit Karma. Both of these organizations offer free credit scores and credit reports.

Then there is also paying for Equifax and/or Transunion directly to get your credit scores and credit reports.

Below are top credit-improvement suggestions:

  • Pay your bills on time, every time
  • Maintain credit limit and keep credit balance below 30%-50% or pay balance entirely
  • Apply for credit, if necessary, that can show a blend of revolving credit (like a credit card) and installment credit (like a car loan)
  • If you’re renting and you pay on time, get your rental payments reported
  • Maintain your earliest account (don’t close old credit cards)
  • Dispute inaccurate credit report information

2. Save up for a higher down payment

Getting a mortgage with bad credit typically requires a higher down payment of at least 20%. There are bad credit mortgage lenders that can approve with lower down payment; hence working with Effortless Mortgage who specializes in bad credit mortgages in Canada can save you a lot of time, money and effort.  

If you only have less than 20% down payment and your credit score is less than 600, then the best option is to find a co-signer. 

In the Effortless Mortgage blog, How to Get a Mortgage with Bad Credit, it states that the ideal co-signer “should be someone who is a close family or friend, with good income and credit, and very little debt. The last part is important, very little debt.”

3. Find a mortgage lender for people with bad credit

One of the most important part of getting a mortgage with bad credit is finding the right mortgage broker who specializes in working with clients with bad credit for a variety of reasons. It will save you a lot of time, effort and money. And, you have the best chance to get approved for a mortgage. Not all mortgage brokers specialize in bad credit mortgages.

The right mortgage broker like Effortless Mortgage has a very good network of mortgage lenders that include B lenders and private mortgage lenders and know their products well. 

To learn more about getting a mortgage with bad credit, read more in the Effortless Mortgage blog, How to Get a Mortgage with bad Credit, where it explains:

  • Credit scores
  • How to use credit
  • Consumer proposal and bankruptcy
  • Bad credit mortgage lenders
  • How to qualify for bad credit home loans
  • When to a bad credit mortgage is good for you

Visit Effortless Mortgage Youtube Channel for more on bad credit mortgage, private mortgage and other important mortgage topics!