What is a bad credit mortgage?
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When your finances do not measure up to the standard requirements of being pre-approved for a mortgage, some people may not know where to turn. Acquiring bad credit can be detrimental to various aspects of your life, but especially when striving to obtain a home equity loan.
Although individuals with bad credit may not qualify to go the traditional route with a large bank, there are mortgage brokers, financial institutions and private lenders who work with people in these specific circumstances. They offer enhanced flexibility and freedom, in fact.
It is recommended to check your credit score before seeking a mortgage or home equity loan if you are worried that yours may be low; this can be done free of charge in Canada through TransUnion and Equifax, as well as some newer service companies like Mogo Mortgage and Borrowell. Someone with bad credit typically has a credit score below 600 out of a possible 900 (the lowest is 300).
While technically considered average, a score between 600 and 700 can be eligible for a bad credit mortgage if an individual has solid income sources—which is more difficult for those who work on commission or work for themselves, but still possible to determine a projection of how much you will make based on your averages.
A reputable lender can provide a bad credit mortgage or home equity loan despite their client having a lower credit score. However, it is equally important for that individual not to look far beyond one’s means for a home to avoid being unable to make mortgage or home equity loan payments moving forward.
Someone with bad credit must have solid approval of their property to assure it is in average to good condition. Although individuals can still obtain a bad credit mortgage, they may be sanctioned with greater interest rates and extra fees from lenders and mortgage brokers as a result. Whether good or bad, a person’s credit is considered a direct reflection of how risky they are considered to loan money to.