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The ultimate guide to getting a mortgage with a bad credit score

We understand that purchasing a property is a crucial decision in most people’s lives. Are you worried about your bad credit score impacting your mortgage options? This article will help you understand your home purchase options if you have a bad credit score.

mortgage bad credit score

What is a credit score?

In Canada, this is a financial indicator that ranges between 300 and 900. The Canadian credit bureaus assign the score based on a person’s financial history including, income, debt, and more. The score indicates how you have managed your debt and payments in the past. It is one of the factors lenders consider when reviewing your borrowing eligibility.

What is the minimum credit score to get a mortgage in Canada?

When applying for a mortgage in Canada, there is no specific minimum score requirement. But, the lower the score, the more difficult it becomes to find a lender. Lenders often interpret a bad credit score as high risk. However, every lender has different qualification criteria. While some might reject your application right away, others may give you a chance.

Below is a breakdown of the credit score tiers:

  1. 680 and above = Good score for any mortgage
  2. Between 600 and 679 = Fair score for a mortgage
  3. Below 599 = Considered a bad score for a mortgage

The best way to check your credit score is by visiting the Equifax or TransUnion website. You may have to pay a fee to get your credit report.

Can you get a mortgage with a bad credit score?

Yes, you can get a mortgage with a bad credit score but, it may cost you more. You will see the extra cost reflected in your interest rate.

How to get a mortgage with a bad credit score?

1. Find a lender

The first step is shopping around for a lender that will approve your mortgage. When finding a lender, you need to be open-minded and consider several options. Don’t forget to check for penalties and other fees that may increase your overall cost despite low interest rates.

2. Search for government programs

There are several government programs designed for potential homeowners with bad credit scores. You can also get a mortgage with no down payment. We will share more details about this towards the end.

3. Get a co-signer

If you have a bad credit score, you can ask a family member to co-sign your mortgage application. The co-signer is equally responsible for the repayment, and missed payments can impact both your credit scores.

4. Check out first time home buyer programs

There are many programs specifically designed for first time home buyers. Even if you have a bad credit score, several organizations offer benefits and flexible payment options.

5. Increase your down payment

Some lenders may approve your mortgage application if you offer to make a large down payment. In most cases, it should be 20% or higher.

How to improve your chances to get a low interest-rate mortgage

There is no exact minimum credit score requirement for a mortgage in Canada. However, with a bad credit score, you may have to settle for high-interest rates.

You can work towards increasing your credit score by using some of these techniques:

  • Pay all your bills on time. If you don’t have enough money saved, you can speak with your provider and request an extension.
  • Avoid crossing the credit limit on your cards.
  • Don’t apply for new loans or credit cards if you already have a high debt ratio.

We understand that this might be difficult, but it can help you get the mortgage at a low-interest rate, saving you thousands of dollars in the long run.

How to get a mortgage with a bad credit score and no down payment?

If the pandemic has impacted your savings, you can borrow the down payment amount. At the moment, the only option available for Canadians is called Flex Down. If you choose this option, you will also collect more debt and, the rate of interest on the loan may be high.

Mortgage Maestro can help you find the lowest mortgage interest rates even if you have a bad credit score.