Can I Get A Home Loan With A 500 Credit Score?
Whether you are a first time home buyer or homeowner looking to buy a second home, you might be wondering “How can I buy a house with bad credit and no money down?” or “Can I get a loan using my house as collateral with bad credit?”. To help those looking for answers, in this post we’ll look at what requirements banks have to approve your loan, and explain why private mortgage lenders for bad credit might be your best option.
Are Mortgages A Good Idea?
Regardless if you have savings or not, you may still want to apply for a home loan. Mortgage loans allow you to raise funds to buy a home, or if you are already a property owner, to raise funds for any purpose while putting a lien on the property being mortgaged. Because you can spread the repayments on your loan amount over so many years, the amount you’ll pay back every month is manageable, and affordable!
Additionally, the interest rates on mortgage products or home equity loans tend to be lower than any other form of borrowing because the loan is secured against your property. The bank or credit union is assured that if anything goes wrong and you can’t repay your loan, they can go after your property, meaning your real estate property may be repossessed once you are unable to keep up with your mortgage repayments. So even though you might have some good equity saved up in your home, traditional lenders may still have some additional lending criteria they look at, and credit score is among them.
Criteria That High Street Lenders Look At Before Approving Home Loans
So let’s see what strict requirements banks have that make private mortgage lenders the best option for borrowers with bad credit:
- Credit requirements – a minimum credit score of under 700, tells banks you’re a risky borrower, making it harder to qualify for a mortgage.
- Income – lenders are mostly looking at your monthly income with respect to total monthly housing costs
- Current loans – if you have long-term, ongoing debts for car payments, credit card or student loans, lenders will look at whether such payments could affect your ability to pay back a mortgage.
- Down payment percentage – homeowners that can put down at least 20% stand a better chance of receiving conventional mortgages.
Loans For Bad Credit: The Difference Between Banks And Private Mortgage Lenders
In the light of recent global disturbances caused by the COVID-19 pandemic, conventional loans are even harder to get than before. And although interest rates in Canada are lower than ever, buying a house or refinancing a mortgage is getting tougher, with mortgage applications reaching historic lows.
This is because taking more precautions regarding credit risk, and looking at loan portfolios where they need to assess potential delinquencies and possible charge-offs, traditional mortgage lenders have made changes that raise the bar for borrowers. Most of the big banks are now requiring a credit score of at least 700 and a 20 percent down payment for most new mortgage applications.
Borrowers that can only afford a low down payment or those with low credit scores are viewed as having an elevated risk of delinquency, and are now finding it incredibly difficult to get a fair loan, or any loan at all. Private mortgage lenders on the other hand are prioritizing equity more and are focusing less on bad credit or lack of stable income. This makes them a great solution for those looking for a loan with bad credit..
What Private Mortgage Lenders Can Do For Those With Bad Credit
As you already know by now, if you’ve got poor credit, you’ll have fewer options available to you for taking out a loan in BC. But if you don’t want to limit your options to working only with traditional lenders, our carefully selected private mortgage lenders in BC have bad credit home loans for those facing financial difficulties. The main difference between high street banks and private mortgage lenders is that private mortgage brokers consider unique properties based on a borrower’s ability to pay back a loan, not just on income and credit score.
Buying a home with a loan might sometimes be a necessity, but it isn’t a decision to take lightly – particularly if you have a poor or limited credit history. That’s why working with a mortgage broker in BC can help you make the best decision for your situation, and choose among all the options available.
Why Working With A Mortgage Broker Is Always A Good Idea
A good mortgage broker can help connect you to the right private mortgage lender and get the cash you need in a short time. If you keep up with your repayments you’ll be able to build a better credit report so that if you need credit or a loan in the future you should get better interest rates. The eligibility criteria for a bad credit mortgage with our private lenders is different than the one needed for a standard loan.
Arguably, the most important factor to get approved by a private lender is your property type and value. Large urban centres are more appealing to private lenders as these areas carry more real estate value. The mortgaged property must be in good condition, and will have to undergo a strict appraisal before you qualify. With us, approvals are fast, usually taking place within 1 week of application and can be as soon as a couple of days. As for your funding, it will be released in 2-3 weeks.
Since every client is evaluated on an individual basis taking into account the criteria mentioned above, if you wish to find out more about private mortgage lenders or what loans are available for those with bad credit, contact us and we can discuss more. We would be more than happy to answer all your questions and help you make the best decision for your needs.