Often life throws us a curve ball and we get behind on our debt re-payments. Perhaps someone was ill, lost their job, had to take care of a loved one, or just over extended themselves. There can be many reasons. There are many mortgage lenders who understand that life happens and are willing to consider your explanation and may give you a chance.
Depending on the circumstances and how credit challenged you are, prime mortgage lenders may not be willing to or ready to give you that chance, yet.
But, we have options for you too!
If buying a home, you will need more down payment; if refinancing you will need equity in your home.
Often called subprime lenders, these companies take on higher risk situations and rely more heavily on the value of the property, whether you are purchasing or refinancing. They do this to be confident that should you be unable to make your mortgage payments and they must sell your property in order to recover their money, there will be enough profit to pay them back. They will want to confirm your ability to make the mortgage payments but often stretch qualification criteria. There will likely be higher interest rates, broker, lender and legal fees which can be added to the mortgage, This type of mortgage is usually a temporary solution until your credit situation improves and you can transfer to a prime lender with better rates and no fees other than perhaps legal fees.
If we are unable to place your mortgage with either a prime lending institution or an alternative lender, we may consider a private mortgage company or individual who may offer you financing. Again, higher rates and fees, however, this too would be a temporary fix. The amount of equity or down payment is even more important here.
Often, it is prudent to keep your existing first mortgage if the rate is low, and add a second mortgage to pay off the debts and expenses.
We will do the math in order to find the best solution to fit your needs. We not only evaluate the importance of getting debts paid, but we also consider whether or not we can improve your cash flow.
All costs would be communicated to you as soon as possible and upfront so that there are no nasty surprises.
Whether we use an alternative lender or a private lender, it will usually take a year or two to improve your situation enough to move on to prime lenders. Going forward you must you re-establish some good credit and ensure all debts are paid on time.
Here are some tips to get your credit back in line
Maintaining a good credit standing may qualify you for the best rates and terms available as the lenders will see you as minimal risk of defaulting on the loan.
• Make sure all debts are paid on time to at least the minimum payment
• Maintain less than a 75% balance of the limit on all your revolving debts ie credit cards
• Don’t shop around for credit, going from place to place may affect your score because it looks like you’re being turned down, (mortgage brokers usually do only one credit check that can go to multiple lenders)
• Don’t close unused cards, allow them to just drop off your report after 3 years of non use, an unused card in good standing with a zero balance shows better credit worthiness than a closed card
• Don’t go crazy with the debts, they have a way of catching up with you
• If you are running into difficulties contact a financial expert, such as myself, for advice prior to allowing your credit standing to deteriorate, there may be options
Many people do not know that you have the legal right to obtain a copy of your credit report. A mortgage professional can help you obtain a copy of this report and go through it with you to verify that all of the information is accurate. You can run your own credit report by going to
Follow this link to your free credit report from Equifax. https://www.consumer.equifax.ca/personal/products/credit-score-report/
The good news is that your credit report is a working document. This means you have the ability over time, to repair any damaged credit which will increase your score and over time, the credit challenges will be in the past.
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Whether you are buying your very first home, upsizing, downsizing, or refinancing, I can find the right fit for your unique financial situation.