Bad Credit Home Buying Solutions

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Buying a Primary Residence in Canada

If you are looking for place to call home that means you are looking for a mortgage on an owner-occupied property. A place that you as the ‘owner’ will live and get a chance to call your own. The great thing about purchasing your very own place is that you can watch your investment grow as you continue to put your hard-earned money and work into it.

How much of a down payment is required to buy my own home?  

The short answer is that the minimum down payment required is 5% of the purchase price. To meet the minimum down payment requirement there are several conditions applicants must meet.

  • Credit score of 680 or higher on Equifax or Trans-union.
  • Income to assist and service the mortgage you are applying for.
  • No past bankruptcy or consumer proposals filed within the last 5 years.
  • Have an active credit profile with at least two credit products or more. This can be credit cards, loans, line of credits and more.

What is CMHC or Genworth?

When you buy a home in Canada and put a down payment of less than 20% or more against the purchase price your mortgage comes with an insurance premium. This insurance premium gets added on top of the mortgage amount. It is put in place to protect the lender in case you can’t make your monthly mortgage payment obligations. CMHC or Genworth are the third-party insurers used who provide the insurance.

Is there any benefit to paying a mortgage insurance premium?

The real benefit is in the down payment so that you and your family can get a mortgage for up to 95% of the purchase price of a home. Additionally, it provides the convenience of borrowing at a lower interest rate.

Rule of thumb: for every $100,000 you’ll need a minimum down payment of $5,000.00.

My credit is bad, but I’d like to purchase a home.

If your suffering from bad credit and looking to a purchase a new home; all is not lost. There are several options available to you in todays market. Understanding the reasons why your credit is the way it is can be more helpful than you think. Some of the common ailments that affect your mortgage application can be but not limited too…

  • Past bankruptcy or consumer proposals – if the proposal or bankruptcy is current you will need to pay it off prior to your new home purchase.
  • Collections items past due and accumulating high interest.
  • Personal judgements registered against you for money owed.
  • Wage garnishments reporting on your credit report.

The short answer to all of this is that a down payment of 15% or more of your final purchase price will be required. While there still are several lenders out there who will entertain giving you a mortgage with bruised or bad credit; the down payment must meet with lender standards. In todays market lenders who offer financing to those with tarnished credit will only provide financing up to 85% of a property’s value.

Income Generating Rental Properties

Thinking about buying a rental property?

A rental property can come with so many promising things. It will allow you to create a consistent income stream and high valued asset as the years go by. This becomes the point when you put your hard-earned money to work for you.

Qualifying for a rental property mortgage does carry some of the same similarities that came with applying for a mortgage on your primary residence. Your income and the potential rental income will both play a factor in helping you get approved this time. In addition to income your credit score (Equifax or TransUnion) will also play a part in what mortgage options are available to you.

How much of a down payment will I need?

The minimum down payment required will be 20% of your purchase price amount.

Example: $100,000 x 20% – $20,000.00

Here are some helpful tips to purchasing a rental property

Tip 1: Knowing how much you can afford – Getting a Pre-approval.

It is important to speak with your mortgage agent to better understand just how much of a purchase price you can afford. A mortgage pre-approval is useful to find out what the maximum is you can afford. Some properties command more rent than others which means you just may be able to increase your budget a little. If the property type is a multi-unit property this means that you stand to see higher monthly rents in addition to multiple tenants. Get pre-approved!

Tip 2: Choose the right mortgage term – Fixed vs Variable.  

The right mortgage can have a positive impact on the financials of your rental property. If you choose wisely you can potentially save thousands over the length of time you own the property. Consider your long-term plans with the property and how a fixed or variable rate mortgage may affect those plans.

Tip 3: Consider the fixed costs associated with the property.

Aside from the mortgage other costs will impact how much you choose to spend on a rental property.

  • Property Management Company
  • Utilities
  • Maintenance
  • Property taxes

How you choose to divide these up between yourself and the tenant(s) could mean the difference between a positive and negative cash flow monthly.

If your purchasing a new home or a rental property whether it be your first or an additional property and have questions give us a call or apply online today to find out more.

We have been helping Canadian buyers for years find suitable mortgage financing that fits their needs.