Different mortgage loans are offered to customers based on their income and credit profile, down payment, and other factors.
Is It Possible to Get a Mortgage with Bad Credit in Canada?
While many brick-and-mortar banks consider customers with poor credit to be high risk, there are lenders who are willing to extend loans to clients, regardless of their payment history. One option is to contact online bad credit mortgage lenders or finance services in your area. They generally look at factors such as income range, type of employment, and whether the applicant is a first time buyer.
How Do I Qualify for a Mortgage in Canada if I Don’t Have Good Credit?
There are secured loans that are specifically designed for borrowers with less-than-perfect credit. One of the most important factors that lenders look into is proof of sufficient income. Financial institutions want to make sure that borrowers earn enough to make timely payments. Obviously, many lenders also require a higher down payment because they deal with risky clients. Customers with stellar credit are often offered competitive terms, and the down payment can be as low as 5 – 10 percent. At the same time, borrowers with poor credit may have to put 15 – 20 percent down. The higher the down payment, the better the chances of getting approved for a mortgage loan. A reliable co-signer with a solid payment history may be required as well.
Be Realistic – Buy What You Can Afford
Since the down payment is a certain percentage of the property’s value, you may want to set a price range based on the maximum down payment you can afford. Your debt to income ratio is also an important consideration, and a high DTI shows that you may be unable to meet your monthly payments. Look at your housing expenses as well and factor in costs such as cooperative, condominium, or homeowners association fees, hazard insurance, property taxes, interest charges, and principal amount. Lenders also look at your total debt ratio. They factor in recurring payments such as alimony and child support, student and consumer installment loans, vehicle leases and loans, and credit cards.
Online Bad Credit Mortgage Lenders in Canada
Canadian Mortgage Finder – http://www.canadianmortgagefinder.com/
This is a good place to look for a bad credit mortgage if you can put at least 15 percent down. The terms offered depend on whether you are a repeat or new home buyer. There are different options available, including open, variable, fixed rate, and special mortgages. Rates vary based on the loan term and range from 2.89 percent on a 1-year mortgage to 4.49 percent on a 10-year loan. The rate on variable mortgages is set at 2.45 percent.
Family Lending – https://www.familylending.ca/lending/poor-credit.html
This is a lending service that specializes in bad credit mortgages and offers rates ranging from 2.3 percent for a variable rate mortgage to 4.39 percent for a 10-year closed loan. Fixed rate mortgages usually go with higher rates but give customers a sense of security. The interest rate is based on the loan type while amounts vary from less than $50,000 to $500,000 and higher. There is an option to get preapproved. Borrowers with poor credit are asked to provide proof of professional appraisal as well as proof of income.
Canada Lend – http://www.canadalend.com/Services/BadCredit.aspx
This is yet another loan provider that offers mortgages to borrowers with average and bad credit. Customers are offered fixed rate loans and terms range from 1 to 5 years. The rate on a 2-year mortgage can be as low as 2.49 percent while 3-year mortgages feature a slightly higher rate of 2.59 percent. Borrowers with different credit profiles qualify, even applicants who have consumer proposals, bankruptcies, and tarnished credit. Clients who are in a consumer proposal and those who are new to credit are also likely applicants. To apply for a loan, clients provide details such as their SIN, current mortgage balance, residential value and status, reason for loan and amount required, outstanding debts, type of employment, and income.
Mortgage Brokers in Canada
Mortgage brokers can be helpful in many ways as they help potential homebuyers to find competitive interest rates and terms. Brokers maintain contacts with different financial establishments and save customers valuable time and money. Some lenders work exclusively with brokers, and they have access to a large pool of borrowing solutions. There is a difference between financial establishments and mortgage brokers in that the later work as intermediaries between lenders and homebuyers. It is their job to determine which financial institution is the best choice based on the customer’s credit profile and loan purpose and requirements.
Is Canada in Danger of Subprime Lending?
Last year data shows that slightly over 2 percent of all mortgages in Canada are underwritten by subprime lenders, which isn’t a serious cause of concern. While the share market of unconventional lenders has increased substantially, defaults are unlikely to trigger a major financial crisis. Some experts warn that the Canadian housing market may be overvalued but there is no reason to worry about serious adverse shocks in the near future.
While many borrowers apply for mortgage loans with banks and credit unions, bad credit applicants are often turned down and look for alternative lenders and solutions. The good news is that there are bad credit mortgage lenders that offer fixed and variable rate solutions to clients with different credit profiles and payment histories. Subprime lenders offer loans with different repayment terms to high-risk borrowers. This is why many lenders require a substantial down payment and proof of income and regular employment. Subprime mortgages are also available to borrowers with a history of delinquencies, arrears, foreclosures, and defaults who have few other options left to finance the purchase of a home.