If your credit is less than perfect, you may think that it is not possible for you to become a homeowner – or if you are already a homeowner and have bad credit, you may be worried that you will not be able to renew your mortgage when the term has expired. Fortunately, there are lenders out there that can help you get a mortgage – even if you have bad credit.
A bad credit mortgage is exactly what it sounds like. It is a mortgage that is designed specifically to help those with poor credit. These mortgages are lent by lenders who specialize in this type of mortgage. In most cases, you will have to pay a higher interest rate than you would for a traditional mortgage however this may be well worth it if it allows you to become a homeowner.
If you cannot qualify for a traditional mortgage, then a bad credit mortgage may be a good option for you if you want to become a homeowner. While some might argue that you should try to repair your credit before buying a home, this may not necessarily be the best choice for you.
It is no secret that home values have gone up dramatically in recent years. And since the prices of homes are only expected to continue to go up, waiting until you can repair your credit on your own may not be feasible for you. Buying a home now (even if you’re paying more interest because you have a bad credit mortgage) may ultimately be a lot more affordable than buying a home a year or two from now at an increased price.
Furthermore, did you know that a bad credit mortgage can actually help you improve your credit score? As long as you are able to make your payments in full and on time, you’ll be working to repair your credit. That means that by the time the term of your bad credit mortgage is over, you may be able to qualify for a traditional mortgage – or at least a mortgage at a lower interest rate.
It was mentioned earlier that bad credit mortgages have higher interest rates than traditional mortgage – but that doesn’t mean that you still shouldn’t try to get the best interest rate possible! To do this, it is important to work with an experienced mortgage broker who knows the industry.
When you work with a mortgage broker, your broker will use their extensive contact list to find you the right lender and rate for your circumstances.
Additionally, to ensure you get the best rate, you should be taking steps to repair your credit now. Make sure you are paying your bills on time and request a copy of your credit report from TransUnion and Equifax to make sure there aren’t any debts recorded on your credit report that shouldn’t be there.
The process for getting a bad credit mortgage is much the same as the process for getting a traditional mortgage. The lender will want to get certain financial information from you such as a T4 statement, a copy of a recent pay stub, a list of assets and liabilities, etc. Depending on the lender, there may be other information required as well. But don’t worry – your mortgage broker will provide you with a checklist of all the documentation you’ll need to gather, and they will review it to make sure you have everything you need before sending in the application to the lender.
Once your bad credit mortgage is approved, you’ll need to make regular monthly or bi-weekly payments on it just as you would a traditional mortgage.
In order to get a bad credit mortgage from a reputable lender, you will almost certainly have to work with a mortgage broker. Working with a mortgage broker to get your bad credit mortgage has the following advantages:
If you would like to learn more about getting a bad credit mortgage, I can help. Contact me today for a free consultation.