You may have faced some speed bumps in the road of life. Now you are trying to get on the right track and become a home owner. You are not sure if your credit history is going to prevent you from getting a mortgage loan. There are options for you, but they may be costly. Here is a rundown of ways that you can check your credit score and get a mortgage if you have bad credit. While it is still possible to get a mortgage with bad credit be prepared to pay some higher fees.
1. Checking Your Credit Score
In Canada, your credit score can range between 300 and 900 assigned by Equifax and TransUnion. This will tell your past credit history. To check your score, you can pay either of these agencies, or you can get them for free from a mortgage broker. You will be able to see all of your credit and any outstanding balances that you may have. If all of your bills have been paid on time and you do not have more debt than you can afford to pay back your credit score should be at least a 680. If not keep on reading the information below. If you have defaulted on your debt chances are that your credit is less then perfect.
Check your credit score rating here:
2. Find a Mortgage Lender For Bad Credit
If your credit score is between 600 and 700 or above, you can get a mortgage loan from a big bank known as an A lender. If your credit score is below 600 many of the big banks will not give you a mortgage loan. You will have to look for a B lender or a subprime lender. They are companies that work with people with credit problems. If you went through bankruptcy, you might need to find a private lender. If you are working with a mortgage broker, they should recommend a lender that will work with you. Be sure to cooperate with a qualified private lender. They can still give you a mortgage loan, but there are some additional things that you are going to need to be aware of.
Lenders look at many different factors, not just credit score. They check out income to debt levels. If you have a lot of debt built up this makes you more of a risk. If you have debt that is not too high compared to your income you are less of a risk. If you have good credit, you may be able to put only 5% of the purchase price down. If you are bad credit, they may need 20-25% of the acquisition price down since you are a bigger risk. This will allow you to negotiate rates since you are putting a large portion of the purchase price out when you purchase the home.
4. Be Prepared for Extra Fees
In addition to having a larger down payment, you are going to have to pay extra fees. Lenders can charge 1 percent of the purchase price for processing the bad credit application. You broker may take on an extra 1% as well. The average price of a home in Canada, according to home loans Vancouver BC, is $391,823, and with this extra two percent, you will need $7,836. You will also need a 20 percent down payment which comes out to $78,364. That means to purchase the home you will need to have $86.200 cash. It may take you some time to save up to purchase the home. You may want to look at paying down some of your debt as well.
5. Forget the Best Rates
Your credit score will determine what lenders are willing to work with you and the rates that you can get. With good credit, you can work with the best lenders and get the best rates. If your credit is not so good, you will work with B lenders or a private lender. They often charge higher interest rates. Your credit score determines how much a risk a lender is taking giving a loan to you. If you want a lower rate on your mortgage to be sure to make all of your payments on time. Pay off some of your debt so you can boost your credit score.