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How To Get A Mortgage With Bad Credit


This is a very common question asked by a many clients who are determined in getting a mortgage with bad. The good news is that borrowers with bad credit can still get a mortgage and Canadian Mortgage Services can help you overcome the obstacles along the way.

So how do you get a mortgage with bad credit? We first need to look at your credit report to determine a few things:

  1. What is the actual credit score
    1. This will help us determine the number of lending institutions that will accept your application
    2. Number of Trades
      1. This will show us how many different accounts you are currently carrying
      2. Derogatory items
        1. We will look to see what items on the credit report are derogatory and affecting your credit the most
        2. Monthly Payments
          1. Since the minimum monthly payments are factored into the overall debt ratios when applying for a mortgage, we would need to calculate your total monthly payments for your unsecured debts.

Once we go over the credit report we will begin to have a better understanding of your current financial circumstances and an idea on how to get your mortgage approved. Once we factor in the gross income and entire debts of all the applicants seeking to get a mortgage, we will be able to determine the following:

  1. Maximum mortgage you can carry based on the likely mortgage interest rate , term and amortization period
  2. Minimum down payment required
    1. Borrowers with bad credit are almost always disqualified from getting unconventional mortgages or mortgage loans with a down payment of less than 20%. This is because it is nearly impossible to get default insurance with bad credit and/or high debt ratios.

It is important to note that the default insurance companies are more stringent on their approval requirements because they have the most to lose in the case of default. Remember, all mortgages exceeding 80% to the value of the home are legally required to be insured and since the insurance companies are unwilling to approve applicants with bad credit, the only way to circumvent this requirement is to come up with the minimum down payment of 20% (at least).

Here are a few more ways that you can get approved for a mortgage with bad credit:

  1. Address the credit report
    1. If you are carrying debts that you can pay off, pay them off. Sometimes it is easier to repair your credit than to come up with the extra down payment
    2. Co-signer
      1. If you have a family member or friend that is willing to act as a co-signer for your application, they will help strengthen your application for approval. Of course the co-signer will have to have good credit for their participation to make a positive influence.
      2. Gifted Money
        1. You can accept money from a family member or friend to satisfy the minimum down payment requirements. Although this money is considered a gift and will have no legal obligations of repayment, many clients make arrangements off the record to compensate those that help them.

When it comes to mortgages, there are a few ways to get approved with bad credit. Sometimes these solutions are manageable by some while at other times they are not. At Canadian Mortgage Services, we strive to understand the individual circumstances and try to find the best possible solution. We will show you your options and leave it to you to decide the best course of action. Sometimes the solutions presented can be executed immediately, while at other times they cannot, but either way we will put you in the right direction!

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