How To Get A Mortgage with A Bad Credit
Getting a mortgage can be challenging, especially if you have bad credit. However, it's not impossible. Here are some tips on how to get a mortgage with bad credit:
Improve your credit score
The first step to getting a mortgage with bad credit is to improve your credit score. This can be done by paying off outstanding debts, making payments on time, and avoiding new credit applications. According to Equifax Canada, the average credit score in Canada is 660, but a score of 680 or higher is typically required to qualify for a mortgage.
Save for a larger down payment
A larger down payment can help offset a lower credit score and improve your chances of getting approved for a mortgage. According to the Canada Mortgage and Housing Corporation (CMHC), a down payment of at least 20% is typically required to qualify for a mortgage without mortgage insurance.
Consider alternative lenders
Traditional lenders such as banks and credit unions may be more hesitant to lend to borrowers with bad credit. However, alternative lenders such as private lenders and mortgage investment corporations (MICs) may be more flexible. These lenders may be willing to overlook a lower credit score in exchange for a higher interest rate or larger down payment.
Get a co-signer
A co-signer with good credit can improve your chances of getting approved for a mortgage. A co-signer agrees to take responsibility for the loan if you're unable to make payments, which can provide reassurance to lenders.
Work with a mortgage broker
A mortgage broker can help connect you with lenders who specialize in working with borrowers with bad credit. A broker can also provide guidance on how to improve your credit score and increase your chances of getting approved for a mortgage.
By taking steps to improve your credit score, saving for a larger down payment, considering alternative lenders, getting a co-signer, and working with a mortgage broker, you can increase your chances of getting approved for a mortgage. It's important to remember that lenders will typically charge a higher interest rate to borrowers with bad credit, so be prepared to pay more over the life of the loan.