“I’ve sent Kam some tough deals with clients over leveraged and already turned down by the banks. He finds a way to make things happen” – Kevin Ramsay, Fair Realty
Do you have bruised or bad credit and are in need of a mortgage? We can help.
Years ago, you had to go to a bank to apply for a mortgage. And if you didn’t meet their criteria, you were out of luck. There was really nowhere else to go.
Thankfully, those days are long gone. Now, there are lenders who specialize in non-conventional mortgage loans to help out people just like you. People who:
- Have less than perfect or bad credit
- Sometimes have no established credit
- Have had a previous bankruptcy
- Need a sub-prime mortgage
- Are currently in a consumer proposal
- Are in credit counseling today
- Are new to Canada and are non-landed immigrants
- Are self-employed and can’t verify their income by traditional means
- Are offshore investors, investing in Canadian real estate
- Are buying a unique property that doesn’t fit into the guidelines of the major banks and insurers like CMHC.
If you fall into any of the above categories, we have three (or more) options available:
1. First Mortgage Program
- Up to 80 percent of the value of your property in the form of a first mortgage with a mortgage bank or finance company
This program is for clients that can verify consistent employment and income as well as those who cannot. Ideally, these clients have some slow but not really bad credit. This program generally offers solutions that are priced fairly competitively in the marketplace.
2. Second Mortgage Program
- Up to 85 percent of the value of your property in the form of a second mortgage with a secondary lender, either institutional or private
This program is for reasonably tarnished credit, previous bankruptcy, unverifiable income, the self-employed, recent immigrants to Canada, etc. In some cases mortgage financing up to 85 percent of the home’s value can be arranged provided the property and the client meet the criteria.
3. No Questions 65 percent First or Second Mortgage Program
- Up to 65 percent of the value of your property in the form or a first or second mortgage with a secondary lender, either private or institutional
If you have exceptionally tarnished credit, previous bankruptcies, unverifiable income and/or are self-employed but need funds in a hurry, then this program is for you. Under this program, we offer same day approvals and can have funds to you within two to three days. Remember, under this program your home is the key, not your credit!
Here is a brief video that explains some of the concepts that are explained below:
Non-conforming mortgages are qualified based on the following:
In a tough credit situation, the down payment/equity is everything. If the mortgage loan goes into foreclosure, the down payment is all that’s left to provide a cushion for the lender while they go through the legal proceeding. Therefore, most mortgage lenders will generally require a minimum of least 15 percent of the value of the home.
Naturally, the higher the down payment, the easier it gets to qualify for the mortgage.
Occasionally, exceptions are made whereby a 10percent down payment will be sufficient. But with bruised credit, this is rare, and an approval will hinge on the other aspects of the deal, such as income, job stability and overall credit since the issues. Higher down payments come with the territory if you have bad credit.
Even non-conventional lenders require that you have enough income to repay the mortgage. They aren’t nearly as adamant about debt service ratios as traditional lenders, but they still need to ensure you’re able to make the monthly mortgage payments.
The income requirements must be reasonable to service the loan, which means you must be working or self-employed and have income coming in. The good news, however, is that our income requirements do not have to fit into the typical GDS/TDS ratio calculations that conventional mainstream lenders have, plus we tend to be more flexible as the down payment/equity increases.
Self-employed clients quite often have to acquire their financing under this program as many do not show enough taxable income to qualify under mainstream guidelines.
Now the only exception to this lies with the up to 65percent program. Under this program we have far more flexibility when it comes to income. You don’t need to be gainfully employed and we can incorporate the monthly payments into the mortgage loan.
The property is the most important component of a bruised credit mortgage loan. In essence, the lenders are lending on the value of the home, and as such will be insistent that the property is a good and marketable piece of real estate. After all, this is their security that their investment is protected in case of default.
A property in a major urban center is easier to finance than a farm in rural Canada because there are simply more buyers for urban properties, and the chance of liquidating a repossessed home is invariably easier. As well, properties on municipal water and sewer are easier to approve than those on well and septic.
If the property’s appraisal does not meet their approval, a loan will not be offered.
The minimum requirement is that you have a credit rating. Good, bad or ugly—it doesn’t matter. In some cases, our lenders will make an exception if you don’t have a rating at all, but once again it will come down to loan value. Different lenders have different lending thresholds: Some will insist that any outstanding bad debts be paid off before they will lend the money, while others will not care as long as the down payment/equity is reasonable. Typically our lenders look for a minimum beacon score of 500, however as mentioned exceptions are made when the deal makes sense.
If you have declared bankruptcy, you may still qualify for a mortgage. Your available down payment determines what and how much you will be approved for.
When you have less than 20 percent down, you are required to get mortgage insurance either through CMHC, Genworth or Canada Guaranty. They all require that a previously bankrupt client be discharged a minimum of two years as well have two years re-established credit before an insured mortgage is offered with five or ten percent down payment.
Re-establishing your credit is not as difficult as it may seem. Contact us and we can assist you in getting going. If your two-year, post-bankruptcy waiting period is not yet past, in some cases we may be able to get you mortgage financing provided you have a minimum of 15 percent of the purchase price. Typically when we do these mortgages they are in the form of a first and second mortgage to 85 percent of the value of the home, and rates can be higher than those of traditional options. However, you get to avoid paying mortgage insurance premiums.
Lender/Broker Fees for a Bad Credit Mortgage
Most times, for good credit clients, the lender pays a small commission to the mortgage broker. However, in bad credit mortgage situations, the compensation for the broker for the work done in securing financing must be paid by the client. This fee is typically paid on closing and is a percentage of the financing arranged.
Almost always, there will be fees charged by a second mortgage lender. The fee amounts are determined by the lender based on their risk evaluation of your mortgage request.
Our typical brokerage fee is between one and three percent of the total financing amount and can be deducted from the mortgage proceeds. Once we’ve received your application and had a chance to review your file we will discuss these costs up front.
If you are looking for a bruised or bad credit mortgage, feel free to contact one of our Mortgage Professionals to find out how we can help you achieve your dreams of home-ownership.