Your credit score is an important deciding factor for whether or not you’ll qualify for a mortgage in Canada. In addition to that, your credit score will help determine how much interest you’ll pay throughout the duration of your mortgage. A higher credit score typically means you’ll pay less in interest because your mortgage is deemed lower-risk by the lenders.
Unfortunately, not everybody has good credit. Many Calgary families are in the market for a new home, but not all of them have perfect credit scores. You could spend your entire adult life paying all of your bills on time, avoiding any significant debts, saving up your money responsibly, and still not having a great credit score because you haven’t had a chance to prove yourself to lenders.
Here’s a breakdown of the different credit score tiers and how potential lenders perceive them:
- Below 500 is considered to be a terrible credit score. You will need to work on this.
- The 500-579 range is considered very poor and won’t be doing you any favours.
- The 580-619 range is considered poor, but you’re getting close to being in pretty good shape.
- The 620-679 range is an average credit score for Canadians.
- The 680-719 range is good and should put you in a good position for a mortgage.
- The 720-779 range is very good and will be very beneficial when seeking a loan.
- A score of 780 and above is excellent and puts you in the lowest-risk bracket.
If your credit score is on the lower side, or if you’re not sure what your score is yet, we can work with you to correct that. There are many factors that affect your credit score; the two most significant factors are the amount of debt you have (and how it compares to your income) and your payment history on previous debts. The overall length of your credit file, new inquiries into your credit report, and the diversity of your debts each play a role, too.
If you have a bad credit score, we want to help you improve it, and we want to help you find a lender that will work with you to help you buy a home that you’ll love. Many lenders will recognize that just because your credit score isn’t perfect, that doesn’t mean you aren’t perfectly capable of making your mortgage payments each month.
A Mortgage Broker in Calgary for Bad Credit
Many Canadians have bad credit. Does that mean they should never be able to buy a home? Of course not!
We’re here to help you improve your credit by taking the important and necessary steps to increase your chances of getting approved for a mortgage, even if your credit score still isn’t perfect.
Fixing bad credit is a multi-faceted process that involves examining your current credit situation and determining the “easy wins” to boost your credit score.
Then, we can match you up with an appropriate lender who will listen to your unique situation and understand that not everybody has perfect credit. There are plenty of great people who are perfectly capable of paying their mortgage. These people work hard and deserve to own their own home, even if they don’t have flawless credit.
Bad credit shouldn’t mean that you’re stuck paying expensive rent for the rest of your life. You work hard and you put in your hours. You pay your bills on time. When the cost of a mortgage is even less than you’re currently paying for rent, why shouldn’t you be able to make payments towards something that’s yours to keep at the end of the day?
Can You Get a Mortgage With No Credit Score?
Some people have bad credit, and a bad credit mortgage can be challenging to obtain, but what about people who have no credit at all? Can you get a mortgage with no credit score?
This is one of those situations where being on top of all of your finances for your entire life can end up making things more difficult for you. You might not have a credit score:
- If you’ve always saved up cash to buy everything and never needed to use credit cards
- If you paid for all of your vehicles in cash
- If you haven’t taken out any loans in the past
You’ve been far above average in terms of being responsible with your money, but you’ve been so responsible that you can’t prove that you’re trustworthy to a lender who wants to see a credit score. It feels unfair, right?
Bad Credit vs. No Credit: Which Is Worse?
Once again, let’s imagine you’ve been perfect with your money. You’ve saved up a down payment, you’ve always paid your bills on time, you’ve never needed credit cards, you’ve never needed to borrow money to purchase a car, you haven’t wanted a cellphone, etc. It’s possible you have no credit score or a credit score that really doesn’t match your creditworthiness in the grand scheme of things.
On the other hand, there could be somebody else who has had some missteps over the years, who has a high debt ratio on their credit cards, who still owes 15 grand on their newest car, or maybe that has even declared bankruptcy a few years ago. Maybe there are some nagging student loans, an old cable bill that went to collections, and so on and so forth.
In these two situations, it’s entirely possible that the person with bad credit could have an easier time getting a mortgage than the person with no credit score at all, assuming the bad credit score isn’t too poor. This is one of the instances where using a credit score doesn’t tell the whole story.
- No credit score: This is someone, as described above, who hasn’t needed to use the types of financial tools that one would typically use to build up a credit score. It’s not that they have a bad score or they’ve made mistakes. The issue is simply that there’s a lack of lending history with which to calculate a score.
- A bad score: This is someone who has too much debt, too low of an income, has forgotten to make some payments on time or has had some missteps over the years.
Lenders may look at both people and determine that despite one person having no credit (yet having been responsible with money for their entire life), the other person with bad credit is less of a risk — as a lending history, albeit a poor one, is known.
However, this doesn’t mean it’s impossible to get a mortgage with no traditional credit history, because there’s such thing as nontraditional credit, too.
What Is Nontraditional Credit?
Nontraditional credit refers to the types of reliable payments a person has made that don’t show up on their credit score, for example, things like rent payments, utilities, and other bills that may hurt your credit score if they end up going to a collections agency, but won’t help establish credit when you’re paying them on time.
Having proof of these types of payments, and having made them on time, is helpful in getting a mortgage with no credit but it’s not always enough, especially when you’re looking at A lenders, so you may want to consider looking at B lenders.
What’s the Difference Between A Lenders and B Lenders?
If you haven’t heard the terms “A lenders” and “B lenders” and need a little clarity on what they mean, the distinction is quite simple.
- An A lender is a traditional bank or a credit union, offering mortgages to those with good credit history.
- B lenders often have a lower barrier to entry, as they are more concerned with the amount of equity a person has, rather than their credit history.
While B lenders typically offer moderately higher interest rates, they are not governed in the same way as traditional banks and can therefore be more flexible — making exceptions for people with low or no credit scores when it makes sense to do so.
If you’re looking for a “bad credit mortgage”, you can book a 20 minute consultation to learn more about what we can offer you. If you decide to look elsewhere, please make sure to read all of the documentation very carefully before you sign anything, since some lenders have been known to insert very unreasonable terms into their mortgage applications.
There are certain lenders who will work with you to keep you in your home should you run into hardships, however, others will do their best to force a sale as quickly as possible, leaving you at a major loss during a time when you just needed a little help.
Ideally, everyone would be able to walk into a traditional financial institution and get instant approval for a mortgage.
Unfortunately, this isn’t a reality for many Canadians. Whether you’ve made some mistakes in the past that are still haunting you, or you just haven’t needed many loans over the years to build up your credit, if you want to own a home then you’ll have to find the best option for a mortgage that’s available to you.
If you aren’t able to qualify for a mortgage, but you still want to own a home, you’re not necessarily out of luck. There are other options that may or may not suit you.
Help From Your Family
If your family is in a position to help you, this could be a viable option, but there are risks associated with it. For example, if your parent or parents have the cash available, you could borrow from them, using similar terms that you might find with a traditional mortgage.
Your parents could own the property outright, and you could make regular payments to them that they essentially put towards equity in the home for you, ultimately signing the house over to you.
If your parents don’t have the money to float the purchase of a new home, they could always co-sign a regular mortgage for you, or take it out on their own, even using their existing home as collateral, but this can be a very risky move in the event that something happens where you’re unable to make payments.
Be warned, large sums of money and family members can cause a rift, especially if things don’t go exactly as planned. On the plus side, the bank won’t repossess the house if you miss payments and your parents are able to help, but if your parents don’t have the extra money to float you, they could end up losing their house in the process, which is a terrible outcome.
Saving Up A Much Bigger Down Payment
If you have bad enough credit that you’re turned down for a mortgage, your best option could be to simply delay the home buying process, as difficult as that may be. Saving up a larger down payment will increase your likelihood of being approved since you won’t need as large of a loan.
Part of this process should also include paying down any outstanding debt that you have, as they are also going to weigh against you when the banks or alternative lenders decide whether or not to approve your mortgage application.
Taking time to save up more money, to pay down your debts, and to improve your credit score in the process can only help. It may not be enough to push you over the edge for a regular mortgage from a standard bank, but if you work at it, you can get yourself into a position to qualify for a mortgage from an alternative lender, if you can’t already.
If you can increase your income without adding new debts and liabilities, this will also help a great deal because this is a major factor that lenders look at to determine your creditworthiness.
Bad Credit Home Mortgage Loan Lenders
There are numerous types of bad credit home mortgage loan lenders that specialize in helping people with bad credit become homeowners. It’s not always easy, depending on how bad their credit is and the specifics of each situation, but they’ll work with you to find the right terms to make things work.
If you have problems with your credit, and you’ve been denied a mortgage from a bank, or you’re hesitant to reach out to them in the first place because you aren’t confident you’ll be accepted, don’t hesitate to reach out to us. We’ve dealt with all sorts of unique situations, from people with no credit to people with very bad credit, and you might be surprised how much closer you are to homeownership than you realize.
Take the Next Step Towards Owning a Home Today
It never hurts to give us a call for a free consultation, we’ll be honest and upfront with you and we’ll let you know exactly what you can expect, or what needs to be done to improve your chances as you take steps towards owning your own home in Calgary. A bad credit mortgage in Calgary is nothing to be ashamed of, it means you’re taking steps towards financial freedom in your future through investing in homeownership for yourself, and a stable future for your family.