There are several mortgage lenders and banks who will approve a bad credit mortgage in Ontario. Bad credit is no stranger to many folks, and nearly 20% of Canadians have an “extreme” or “bad” credit score. This makes it difficult to get approved for loans, credit cards, apartments, and many other facets of modern life.
So how can you get a mortgage if you’re in this situation? What banks and institutions will even give you a loan? Read on for our guide to getting a bad credit mortgage!
What Counts as Bad Credit?
Typically, anything under 600 is bad enough that many banks and institutions won’t work with you. Typically, major banks won’t even give you a mortgage unless you have a 650 or better, and it’s even better to be in the 700’s.
If you’re not sure what your credit score is, you can check with one of the two major credit bureaus. Equifax Canada and TransUnion Canada both give credit reports, and it’s often a good idea to check with both just in case there are any differences between them.
If you have good enough credit, you can apply for a mortgage as normal. However, you may be able to apply for something called a bad credit mortgage. These are typically quite a bit costlier, but are usually temporary.
What Type of Lenders Will Give You a Bad Credit Mortgage?
If you have a bad credit score, you’re not going to qualify for a mortgage through many big banks. That means you need to start looking for private mortgage lenders or B lenders.
Private mortgage lenders tend to be more flexible and lenient with their loans, but you pay for this flexibility with much higher costs. Their mortgage rates are often many times higher than the rates for traditional banks and mortgages. Additionally, you may need to place a larger down payment if you go through a private mortgage lender.
B lenders are non-traditional banks, which typically include credit unions, monoline mortgage lenders, and other mortgage investment corporations. Some of these B lenders still require a credit score of 600 or better to give mortgages, but others are less stringent.
Even though there are fewer B lenders who will be willing to give you a bad credit mortgage, they tend to offer better rates than private mortgage lenders.
Specific Banks and Lenders
There are quite a few banks and credit unions that are considered B lenders or even sub-B lenders. A mortgage broker can help you shop around for banks that fit the bill. You can also try to contact the institutions individually to see whether they’ll loan to you, but it can take a lot of effort!
One of the best B mortgage lenders will offer flexible terms and conditions that meet your needs. A mortgage broker often helps plenty of buyers get good mortgages even with bad credit.
You’ll also want to check out what type of criteria there is and the documents you will need. Some of the largest B-lenders in Canada offer alternative mortgages for people with bad credit through their unique financing programs. Programs can vary based on region and are subject to an application being reviewed.
If these types of B-lenders aren’t working for you, you’ll want to look into private lenders. They have higher rates, but many of them also have no minimum credit scores! There are quite a few private lenders out there that you can look at to get a mortgage.
Mortgage investment companies cover a lot of areas, and they don’t have a minimum credit score requirement. Some private mortgage lenders do not cover as many areas, but they also have similar interest rates and credit requirements.
Private mortgage lenders and investors are all worth considering as well if you’re in Ontario. They have different interest rates but are also great for people with really low credit scores.
Using Mortgage Brokers
Unfortunately, many banks and private lenders won’t deal with a consumer directly, which limits your options a bit. Thankfully, a mortgage broker can help you a lot!
A mortgage broker can help you get a bad credit mortgage, and often can make sure you get a much better deal. Mortgage brokers are able to work with you to find a mortgage that fits your needs at a rate you can afford.
One of the best aspects of a mortgage broker is the fact that they can work with so many lenders directly. While you have a few options for lenders that you can contact on your own, mortgage brokers are able to work with many other lenders and vastly expand your field of possibilities. Rather than only choosing from a few lenders, a mortgage broker can help you choose from dozens!
It’s generally a good idea to use a mortgage broker, but it’s even better when you have bad credit. With the limitations your credit gives you, you don’t want to limit yourself even further unnecessarily.
And the good news is, using a broker to find a mortgage doesn’t take much time. In fact, they can often use their knowledge of the industry to save you quite a bit of time and money, letting you get your house with far less hassle!
Learn More About Getting a Mortgage
Getting a bad credit mortgage can be tricky, but it’s a great way to get into a house and give yourself time to build credit. Whether you use a broker or go it alone, don’t hesitate to find the best deal for your situation!
But if you’re still unsure where to start, or you’re interested in finding a broker to help navigate the world of mortgages, we’d love to help! Feel free to contact us with any questions or concerns you might have, and we’ll do our best to assist you in any way we can.