Mortgages are one of the most common ways to finance a home. A bad credit mortgage in Ontario can make it challenging for some people to get approved for a mortgage because lenders want borrowers with good credit scores to ensure they can pay back their loans. This is why it’s important that you know your options and what steps you need to take to successfully apply for a mortgage with bad credit. Here are the five things that you should know about getting a mortgage with bad credit.
1) You can still get approved for mortgages with bad credit
There is a common misconception that people with bad credit can’t get approved for mortgages. As long as you have a higher income and a lower level of debt compared to other applicants, you should be able to get approved for a mortgage. However, while your odds of being declined are greater if you have a poor credit history, there are still some lenders who will consider lending to borrowers with poor credit.
2) Self-employed mortgages require careful consideration
A major part of the assessment for applying for a mortgage is verifying that you can afford to make the monthly payments. Lenders don’t like to see self-employed borrowers because they are seen as more of a risk. Lenders want to ensure that they will get their money back, so lenders need to verify your income and run credit checks on you before approving you for the loan. If you are trying to get approved for a mortgage with bad credit and you’re self-employed, you must be prepared to answer questions about your income before you apply.
3) Documentation is another factor when applying for mortgages with bad credit
The lenders will need documents to verify your income, which can be challenging when you have bad credit. Most lenders will want to see the last three years of tax returns, and if you’ve been self-employed for a while, it can be difficult to get the lenders to accept your documents. As well, lenders need to assess how much they will give you, and this is where documentation comes in because you will need proof of income before the lender will approve the loan.
4) You may be able to obtain a second mortgage on your home
When applying for a bad credit mortgage in Ontario, you may be surprised to discover that some companies and online lenders will allow you to obtain a second mortgage on your home if you need additional money. However, these loans can come with high interest rates, so it’s important to look at all of your options before choosing to take on a second mortgage. It’s also important to note that it can be more challenging to get approved for a second mortgage if you already have a first mortgage.
5) Consider getting help from your bank
Many people with bad credit are reluctant to turn to their banks for help because they may not want to alarm them about their situation. However, banks are in the business of lending money, and they will likely be able to find a solution that works for you. Many people with bad credit have been able to get approved for mortgages if their bank conducts a manual review instead of using an automated system for assessing creditworthiness.
If your goal is to secure a mortgage so you can purchase a new home, you are not alone. Many people have bad credit for one reason or another, and there are options available to help them achieve their goal of homeownership. Just make sure that your credit is in good standing before applying for a loan because this will give you the best chance of being approved.
Stop procrastinating and apply for a mortgage with bad credit today. For more information about how you can get approved for a mortgage with bad credit, you can fill out the form here to speak to one of our agents, who can help you explore your options.