Some time ago, mortgage loans were given to only those people who had costly property, great jobs and no problems regarding loan payments. The banks or other financial institutions would carry out a background check on your financials. If they found that you had defaulted on a loan or two or had bad credit ratings or your payments on other loans were pending, they would not grant you any loan. But gone are those days. Today, with bad credit mortgage option, you can avail loans even if you have bad credit ratings. Read on to know more.

What is bad credit mortgage?

Bad credit mortgage option is a fairly new concept. With this, you don't have to say goodbye to the house of your dreams because you lost a job and couldn't make your payments on time! Of course, there are more valid reasons why you couldn't repay your debts regularly. Read on for information on who can avail this kind of mortgage loan.

Who can avail this loan?

Typically, if you belong to any of the following categories, you can apply for bad credit mortgages. These loans are more often than not non-conforming mortgage loans. If you want to buy a property that is not included in the portfolio of Canada Mortgage and Housing Corporation or some of the major banks, you can apply for this loan. 

• You have less than the ideal or bad credit
• Have a tarnished credit
• Are in consumer proposal
• Need a subprime mortgage
• Are a foreigner who wants to invest in Canadian real estate
• Have no established credit
• Have been bankrupt previously
• Are non- landed immigrant toCanada
• Are in credit counseling
• Are in need of an alternative mortgage lender
• Are self- employed recently and hence, cannot verify your income

Requirements to qualify for the mortgage

This industry is competitive and there are many lenders who offer mortgages for people with bad credit. There is no need for you to go to a bank; instead, you can get in touch with mortgage companies that offer such loans. If you are a person with a bad credit history, there are certain requirements that you need to fulfill in order to avail the loan.

1. Decent monthly income

You must have a decent monthly income to pay off the mortgage you will take out. Mortgage lenders evaluate your debt to income ratio for this purpose. A ratio of less than 30% (or 35% in some cases) is preferred by most of the lenders.

2. Down payment

People with ideal credit rating can get a mortgage with five percent down payment. But for people who have a bad credit history the down payment percentage is likely to be higher. Normally, it is about fifteen percent of your home value. Possibility of qualifying for this loan becomes higher according to the increase in down payment value.

There are some more requirements that qualify you to a bad credit mortgage. The value of your property must be appraised by a professional for the lender to approve your loan. Also, you need to have a co- signer who can guarantee your mortgage, under some specified circumstances. Contact a mortgage expert to know more about this option.