What you need to know about Bad Credit Mortgages to get approved in Toronto?

What you need to know about Bad Credit Mortgages in Toronto?

What you need to know about Bad Credit Mortgages to get approved in Toronto?

These days, even people with good credit often struggle to get the mortgage financing they are looking for whether they are looking to become homeowners or are current homeowners looking to refinance, it’s not easy. So, if your credit is bad, you may wonder whether there is any hope of getting a mortgage at all. The good news is that there are many proven ways of getting a mortgage even if you have bad credit. 

To understand why this is the case, it is helpful to understand that there are different types of mortgage lenders in the market. 

The first types of mortgage lenders are Major Banks, Credit Unions and Alternate Lenders and are what you call “A lenders”. These lenders have the best mortgage rates on the market but securing a loan from them is nearly impossible if you do not have very good credit to meet their guidelines.

However, if you cannot quality for a mortgage with an A lender, the next logical step is to look at the second types of lender which are referred to as the B lenders. These are institutions which specialize in helping people with damaged credit. Instead of making their decision based just on your credit score, B Lenders will look at the bigger picture to see if there is a way they can loan you the money you need to purchase a home or refinance your current home.  B lenders will look at factors such as whether you have good cash flow, the value and marketability of the property you are buying or your home you are refinancing and so forth in their decision for an approval.

Finally, if you cannot qualify for a mortgage even with a B lender, you may wish to consider the third types of mortgage lenders which are referred to as Private lenders. A private lender is a company or individual that is willing to issue a mortgage privately. The lender may be an investor looking to make a profit out of the loan or they may even be a friend or family member that wishes to help you out. Whoever the private lender is, it is critical that proper legal documents are drawn up by professionals and the risk of obtaining a private mortgage are discussed upfront, so there are no surprises throughout the process.

Generally speaking bad credit mortgages usually have a higher interest rate than traditional mortgages because they are considered riskier investments for the lender. Nevertheless, if you have bad credit and are looking to get into a home or refinancing your current home, paying a little extra in interest now could be worth it in the long run.

Because bad credit mortgages are also usually for shorter terms that traditional mortgages and allow you a pathway to move your mortgage on renewal. So while you are paying your bad credit mortgage, you can work on repairing your credit so that when your renewal date comes up, you can make the switch to a mortgage with a lower interest rate.

If you would like to learn more about bad credit mortgages and how I can help you with one, contact me today.

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