Even with a Bad Credit Mortgages Are Not Beyond Your Reach

Need a mortgage? Worried because of your bad credit? Mortgages are often approved to those with less than perfect credit history as well. It is even possible to get a mortgage after bankruptcy.

The Canadian mortgage industry is very competitive, and many lenders now offer mortgages to people with “tough” credit. You don’t need to go to a bank to get a mortgage; you can shop around with different mortgage brokers to find the best offer.

To get a mortgage approval, people with bad credit history will need to meet certain conditions in order to qualify for the mortgage. Below we provide the list of requirements usually set up by lenders.

Mortgage qualification requirements for persons with bad credit history

1. Minimum down payment

With a perfect credit, it is possible to get a mortgage with as little as a 5% down payment. If you have a bad credit, mortgage lenders will most likely require a higher down payment, generally a minimum of at least 15% of the value of the home. The higher the down payment, the more likely it is that you will qualify for a mortgage.

2. Sufficient monthly income

Obviously, to qualify for a mortgage you must have enough income to repay the mortgage. Lenders will examine your gross debt service ratio, or GDSR, which is the percentage of your gross monthly income that can be used for housing costs (mortgage payment, utilities and property taxes). Most lenders prefer a GDSR of less than 35%; 30% is even better. This means that if you have gross monthly income of $3,000, a 30% GDSR implies that your mortgage and housing costs cannot exceed $900 per month.

3. Professionally appraised property value

A mortgage is a loan secured by property, such as a house. If you can’t make the mortgage payments, the lender takes the house and sells it to recover the loan. Before the lender will give you a mortgage, they will want proof, from an appraiser, that the house is worth more than the mortgage amount.

4. Co-signer

Even with a down payment and good income, if you have a bad credit history, mortgage lenders may require a co-signer to guarantee the mortgage. Of course, if you apply for a mortgage after a bankruptcy, the lender will be even more likely to require this type of security. A co-signer gives the lender added protection, but it also means that your co-signer is now responsible for the loan if you don’t pay.

To conclude, even if you are asking for a mortgage after a bankruptcy, or you generally have a bad credit, mortgages are not necessarily beyond your reach.

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