How do I get a mortgage if I have bad credit?

You may not get approved.

Bad credit can limit your ability to get a mortgage. You may have options available to you, but the interest rates you’ll qualify for won’t be cheap. If you don’t want to put off purchasing a new home, there are immediate steps you can try taking to get a mortgage with bad credit. If you’re willing to wait, you should take time to improve your credit score and qualify for better mortgage options. Here are ways you can get a mortgage with bad credit.

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Make a larger down payment

Listicle offal viral, flannel franzen roof party shoreditch meditation subway tile bicycle rights tbh If your credit score isn’t great, there are other ways to demonstrate your financial stability to lenders. Making a large down payment of 20% or above provides you with more leverage when working with lenders. It shows that you have a sizeable income and demonstrates your budgeting skills. It will also help you reduce your regular mortgage payments, making them more manageable in the long-run. In short, a larger down payment will often make you a more attractive borrower to mortgage lenders.

Use an alternative mortgage lender

If your credit score falls below 600, you will have a very difficult time getting approved from Canada’s major banks. You’ll more than likely have to work with an alternative lender.

Alternative lenders are more lenient when it comes to credit. However, you’ll usually need to make a heftier down payment of between 20% and 35%. Interest rates also tend to be higher with alternative mortgage lenders.

Alternative lenders may charge additional fees that traditional lenders don’t. For example, an alternative lender might charge a loan processing fee of 1% of your mortgage’s value. If you found this alternative lender through a specialized mortgage broker, the broker might also charge you a finder’s fee of 1%. This additional 2% in fees can be a substantial cost; for a $300,000 mortgage, this amounts to an additional $6000 cost.

Improve your credit score


If you aren’t in a rush to buy a new home, you should take steps to improve your credit score. In general, you can do this by paying your bills on time, trying to not use more than 30% of your available credit limit, applying for new credit selectively, and not closing old credit accounts. By consistently taking these general steps, your credit score should start to improve in the coming months. If you have a zero credit score, here are specific steps you can take to build credit history.

great, there are other ways to demonstrate your financial stability to lenders. Making a large down payment of 20% or above provides you with more leverage when working with lenders. It shows that you have a sizeable income and demonstrates your budgeting skills. It will also help you reduce your regular mortgage payments, making them more manageable in the long run. In short, a larger down payment will often make you a more attractive borrower to mortgage lenders.


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