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Many Canadians face credit issues, especially after encountering life hurdles such as illness or a job loss. Getting back on track can take time, which means you may struggle when buying a home. Fortunately, here are some steps you can take to buy a home in Ontario, Canada, with fair credit.
- Large Down payment. Lenders in Ontario, Canada, look at more than just your credit score when considering your mortgage application. Most of them consider things like your income, debt level, and the size of your down payment. In Canada, you require a minimum down payment of 5% of the property’s price. With fair credit, your lender may require a higher down payment. A down payment of around 25% can assure your lender that you are financially stable enough to own a home. A sizeable down payment will also lower your monthly mortgage payment. Always ensure you use the Government of Canada mortgage calculator to determine your mortgage payments and get a payment schedule.
- Bad Credit Mortgage Lender. Canadian banks require a minimum credit score of 600 to qualify for a mortgage. If you have a credit score that is lower than 600, consider looking for a ‘B Lender’ or ‘subprime lender.’ Such financial institutions work exclusively with Canadians who have bad credit scores. Private mortgage lenders can also help you to secure a home. A mortgage broker can link you with a lender that they know can help you.
- Co-signer or Joint Mortgage. Co-signer mortgage brings a third party on your mortgage. Your co-signer promises to pay your monthly mortgage payments if you cannot afford it. A co-signer acts as a co-borrower. As such, you can access a better mortgage since the co-signer should have a good credit score. Since a co-signer will be taking a significant financial risk for you, most people tend to choose a relative as their third party. A joint mortgage is another option to buy a home in Ontario, Canada, with fair credit. Unlike co-signer mortgages, this option involves two or more people owning and living together in a single home.
- Improve Your Credit score. A higher credit score will always ensure you secure a lower mortgage rate, which translates to lower monthly payments. If you think of buying a home, take time to improve your credit score before applying for a mortgage. Pay your bills on time, stay under your credit limit, keep your oldest account, and do not apply for too much new credit.
- Renewal Time. If you still find it challenging to get a mortgage with fair credit, do not panic. You can renegotiate a bad credit mortgage at the end of your term. Most terms end after five years. As such, you can try to improve your credit score within this period to place you in a better negotiating place. Improving your credit will result in lower interest rates, which can save you a lot of money. However, ensure you shop around for a better mortgage rate when you renew. Altrua Financial provides you with the best rates during your mortgage refinance.
With these tips, you can now own a house in Ontario, Canada, even with fair credit.