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How to Get a Mortgage With a Bad Credit Score

It is not impossible to get a mortgage with a bad credit score, however, the approval process is tough and it depends on the lender you choose. Additionally, you may need to take a few extra steps like purchasing mortgage insurance, paying a higher interest rate, or even making a larger down payment. Below mentioned are five tips for getting a mortgage with bad credit:

Improve your credit score over time

A higher credit score ensures you get low-interest rates and much more favourable terms from traditional lenders. You will also end up paying lower monthly mortgage repayments. If you have recently checked your credit report and your score is too low to qualify for a mortgage from traditional lenders, you may want to repair it before applying for a mortgage. Below are a few tips for improving your credit score:

  • 1. Pay off your bills on time: Avoid missing out on your monthly repayments on any of
    your bills. If you cannot pay the full amount, try to pay the minimum amount, as
    completely ignoring it will cause it to go into delinquency, and it will impact your
    credit score even further. You can get in touch with your lender about a prepayment

  • 2. Stay under the limit: Do not use more than 30% of your available credit limit on
    your cards or line of limit. This will prove to the lender that you are a responsible

  • 3. Avoid applying for new credit: Avoid applying for new credit cards, as it is a red
    flag for credit reporting agencies.

  • 4. Maintain your oldest account: The length of your credit history matters. By cancelling your old credit cards, it shortens your credit history. Even if you do not use your old credit card, just maintain it to increase the length of your credit history.

Save up for a larger down payment

In addition to our credit score, lenders will also take into consideration factors like your mortgage application, your level of debt, the size of your down payment etc. In Canada, the minimum down payment one must make is 5% of the property’s purchase price. If your credit score is not the best, your lender will require a higher down payment, because they are taking a risk lending it to you. If you are looking to apply for a bad credit mortgage to purchase a home, save up to 20 – 25% as a down payment. A larger down payment will signal to the lender that you are financially competent to own a house, and it also lowers your monthly mortgage repayments. You won’t be required to pay for mortgage default insurance as well.

Find a suitable bad credit mortgage lender

You need to maintain a minimum credit score of 600 to get your bad credit mortgage approved by a bank. If your credit score is below 600, most banks will not approve your mortgage loan request. In situations like these, you will need to seek a subprime lender. They exclusively work with individuals who have bad credit scores. You can rely on our mortgage brokers to identify the most suitable lender based on your specific needs and current financial situation.

Consider a co-signer

Another option to secure a mortgage with bad credit is to have a co-signer on your mortgage. A co-signed mortgage is where a third party is bought as a guarantor of the mortgage. The co- signer promises to pay your monthly repayments if you can’t. Securing a co-signer for your mortgage will help you access better rates, as the lender will consider their credit score and income during the mortgage application phase.
However, there are a few risks to using a co-signer for your mortgage. They are a big financial risk to you. If you discontinue making your repayments, the financial burden falls on them. This is the sole reason most co-signers are related to the co-signee.

Work towards your next renewal

Any bad credit mortgage can be renegotiated at the end of your term. Most terms are five years, which gives you ample amount of time to improve your financial situation. Try to improve your score at the beginning of the mortgage. This will over time improve your credit score to eventually get approved for a mortgage from a traditional lender and also save you thousands of dollars in interest. Irrespective of your financial situation, you should always consider shopping around for better rates and terms when you renew. A common mistake made by most borrowers is renewing with the same lender.


While there are options to secure a bad credit mortgage, they are expensive and the monthly payments are higher. If your credit score is not the best, find reasons why and take appropriate steps to improve your finances and ultimately giving you access to lower rates for your mortgage. If you are looking to purchase your dream home with bad credit, please do not hesitate to contact the team at My Mortgage Approved for more information.

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