Getting a mortgage with bad credit history

Getting a mortgage loan is always a problem when your credit history is bad. And in Canada, one homeowner out of every eight will either file a bankruptcy suit, or will arrive at some kind of settlement with their creditors. However, the good news is that there are some ways that help you to own a home despite a bad credit.

Non-Traditional Sources

Generally, the banks will not give you a loan if your credit history is bad. In case your credit report is bad, you need to do something new. Instead of going to banks, it would be better if you look for loans from non-traditional sources.

Down Payment Facilitates Acquiring Loans

Provided you have a bad credit history, the lenders would be encouraged to help you when you make a down payment worth 20% of the property's value. This would help them believe that they are taking a lesser risk. You will get the loan as the down payment will enable the lender to offer it at the lowest rate possible. In fact, your credit history, down payments and job history will have equal importance on deciding your eligibility to acquire a mortgage loan.

Nevertheless, people who have a bad credit and looking to buy a home seldom have sufficient money to make such a down payment. Actually, this is also a problem even for buyers who are most eligible. Mortgage accompanied by upfront payment equivalent to 20% less than the value of the property entails high ration credits and necessitates the Canadian Mortgage and Housing Corporation's (CMHC) approval.

Lenders charge high interest rates from applicants who are given bad credit mortgages, as they are regarded as high risks. Although a veteran mortgage broker may help you to get loan at a lower interest rate, it is always advisable to make an upfront payment 20% above the value of the property, because it will help you to get desirable rates.


You may apply for a mortgage loan even after bankruptcy provided you can offer an acceptable explanation for deficit of funds. For instance, the lender will understand if your bankruptcy was due to medical expenses. On the other hand, no lender will sympathize with you if you tell him that you exhausted your money on shopping.

You can put in a bankruptcy proposal only if you have the trust of the lender having more than one credit account. In case there are two, they should have a track record for two years. For example, if you want that your lender should be serious about your proposal you may require having a credit limit of anything between $1,000 and $2,000.

Although you may possibly apply for a mortgage in Canada despite having a credit history that is bad, it is advisable that you undertake some research prior to proceeding further because your choices are actually very restricted.

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