Suffering from bad credit? If your credit has disintegrated from past financial issues, such as a business failure, bad marriage, or unemployment you may be having a tough time securing a mortgage for your new home. Fortunately we have some information to help you with this difficult task.
Though bad credit mortgage approval used to be rare, it has become increasingly more common as the competition in the Canadian mortgage industry rises. For assistance in finding a bad credit mortgage, seek the help of a mortgage broker that can provide you with useful advice and tailored services. Thanks to the resources mortgage brokers have access to, they can often find lenders willing to provide a bad credit mortgage, as long as the potential borrower fulfills specified requirements.
Poor Credit Mortgage Approval Process
Prior to negotiating a bad credit mortgage refinance, mortgage lenders first need to assess the potential borrower for risk. This will require the application meet a certain number of bad credit mortgage qualifications. Unfortunately, these qualification differ from company to company. This is why it is prudent to seek out bad credit mortgage advice. Here are a few common requirements:
- A larger minimum down payment
Only with good credit can a borrower pay as low as 5% down on their mortgage. With bad credit, the minimum generally increases to somewhere around 15%. The likelihood of qualifying for a bad credit mortgage refinance rises with a larger down payment.
- Evidence of monthly income
Every mortgage lender will need proof that their clients have the means to make their mortgage payments. This means that to qualify for a mortgage, you must be able to prove you are financially capable of handling the responsibility. This involves analyzing your gross debt service ratio – the amount of your income that can pay for housing expenses. Bad credit mortgage borrowers are advised by mortgage brokers to keep their GDSR lower than 30% (ideally) or, at least less than 35%.
- Appraisal of property value
Lenders want to be sure that if you fall through with your mortgage, they can sell the house to recoup their investment. A professional appraiser needs to assure the lender that the house is worth more than the mortgage.
- A reliable co-signer
Asking a friend or relative with good credit to co-sign your application can truly help in securing finances for a bad credit mortgage. Regardless of how large the down payment was, or how steady your income is, a co-signer can guarantee a bad credit mortgage to lessen the risk for the lender. However, this is high risk for the co-signer as they are required to make payments should you fail to.
Contact a FamilyLending.ca mortgage broker today to restore your optimism in finding financing. You can also apply online for information on becoming a pre-approved bad credit mortgage holder.