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How To Get A Mortgage With Poor Credit

Jon Kamin

05 May 2020 Private Mortgages

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How To Get a Mortgage With Poor Credit

For Canadians, being approved for a mortgage by one of the major banks is largely contingent on your credit score. In Canada, credit scores are officially calculated by two credit bureaus Equifax and TransUnion. Your credit score is determined through your financial history – bills and payment history, previous and existing debts, as well as your credit usage and history. Generally, in Canada a credit score will range from 300 to 900, with higher scores providing greater accessibility to financial services including mortgages.

For many Canadians with credit scores below 650 obtaining a mortgage from a major Canadian bank can prove to be challenging. Canadian banks, or ‘A’ lenders, primarily cater their lending services to those with credit scores above 600. Canadians who do not qualify with banks for mortgages or other financing products often turn to alternate lenders, including ‘B’ and private lenders.


‘B’ Lenders for Credit Scores Under 700

‘B’ lenders, or ‘subprime lenders’ are trust companies and institutional lenders providing alternate lending solutions to those with credit scores ranging anywhere from 550 to 700. These lenders provide financing options for those who have poor credit scores or lack a steady income stream. When compared to ‘A’ lenders or Canadian banks, ‘B’ lenders tend to charge a higher interest rate to offset their greater leniency in qualification requirements. ‘B’ lenders will often require home equity from a borrower to counterbalance the higher risk associated with lower credit scores. This allows borrowers with credit or income challenges to qualify for a mortgage. 


Private Mortgage Lenders for Credit Scores Under 600

Private mortgage lenders are typically private companies or individuals willing to provide short-term, interest-only mortgages to those who do not meet the credit requirements of ‘A’ or ‘B’ lenders. Canadians requiring mortgages with credit scores below 600 will likely resort to private mortgage lenders to obtain financing. Unlike Canada’s banks, private mortgage lenders are not regulated by the Bank of Canada, which allows them to set their own rates and qualification standards. As a result, borrowers with poor credit scores can receive the financing they require, though often at a higher interest rate. Much like ‘B’ lenders, a private mortgage will often require borrowers to have considerable home equity available to offset a greater risk of default.  


Which Lender Is Right for Me?

Your credit score will be the largest determining factor as to which lending stream you qualify for.

  • Credit scores 600 to 900 should first check interest rates and their qualification with banks
  • Credit scores 550 to 700 though some will qualify with banks, others may find ‘B’ lenders to be their best option in obtaining a mortgage
  • Credit scores below 600 will likely need to obtain their mortgage through private lenders  

Other scenarios where ‘B’ or private mortgage lenders may be your best bet for a mortgage include:

  • Purchasing an unconventional property
  • Time-sensitive home purchasing situations
  • You have been previously turned down by banks
  • You have a poor credit rating
  • Self-employed with unverifiable income
  • You are new to Canada
  • You lack a credit history


About Rateco

Rateco works with all classification of lenders; ‘A’, ‘B’, and private! We’re happy to work with you to determine your best mortgage partner, regardless of your credit score. We pride ourselves on our borrower-first mentality providing complete transparency and honesty throughout your mortgage experience.

Rateco’s unique auction approach forces lenders to bid their lowest interest rates against each other to finance your mortgage. Borrowers have total choice and control over who they work with, forcing lenders to provide their most competitive interest rates to win your business. Best of all, there’s absolutely no cost to you until your mortgage has been funded. We’re happy to work on your behalf, risk free!