What You Need to Know to Get a Mortgage with Bad Credit

With the current housing market and depressed economy, many Canadians are in situations where they would like to buy a home or refinance their home but they have low or bad credit and, most likely, got declined by their banks for a mortgage.

If you fit any of the following situations, bad credit mortgage option could be for you:

  • Your credit score is lower than 650
  • You are self-employed with hard to verify income or report low or no income on your tax returns
  • You are or have been bankrupt or filed a consumer proposal in the past 7 years
  • You have non traditional Income, for example commission income, cash, disability, seasonal income, and others
  • You are going through a separation or divorce and you want to keep your home and buy out your spouse
  • You are new to Canada or a Foreign Resident
  • You need short-term Bridge Financing to close a home purchase or improve your credit score
  • You are a real estate investor with high debt ratio and in need of more cash flow

The purpose of a Bad Credit Mortgage is to help you improve your credit score and cash flow, so you can qualify for a bank mortgage in 12-24 months.

What You Need to Know to Get a Mortgage with Bad Credit

When buying a house or refinancing a home with bad credit, the first requirement is that you need to have 20% or more down payment or home equity. There are lenders who do approve with less down payment or home equity, but to be on the safe side and to get better rates, it’s best to have higher down payment or equity.


Once you meet the down payment or home equity requirement, the next most important criteria is your income. 

Do you have sufficient income or cash flow to make a mortgage payment? 

Do you have non-traditional income that’s hard to verify? 

Having low income or no income won’t stop you from getting a mortgage with Bad Credit, but it will be more expensive (higher rate) vs. if you have good income.

Credit Score

When it comes to credit score, it pays to wait to boost your credit score before getting a mortgage…if you can.

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

Down Payment

As already mentioned, bad credit mortgages typically require 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.

With bad credit mortgage lenders, it’s important to present a strong business case to them to get your mortgage approved. 

Bad Credit Mortgage is all about common sense lending. Effortless Mortgage has a strong relationship with 60+ Bad Credit Mortgage Lenders. Our experienced advisors can help you significantly increase your chances of approval.

It is important to plan ahead. If you have any questions, the Effortless Mortgage team is available 7 days a week and specializes in helping clients get a mortgage with bad credit.

Learn more from our blog, How to Get a Mortgage with Bad Credit.