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A Challenged or Recovering Credit Score Does Not Mean The End

May 20, 2016

The reality of the world today is that things happen – often due to changes in circumstance or other unforeseen occurrences, home-owners may find themselves with bruised credit ratings.


Fortunately, there currently exists a number of alternatives for home-owners with recovering credit – many of whom have felt snubbed by Canada’s largest banks. Although it may not be realistic to expect to receive the least-expensive mortgage rates in the market; there are a number of opportunities to obtain financing through companies you may not have heard of. These companies, often times billion dollar enterprises, are institutional lenders who specialize in the kinds of mortgage products specifically for home-owners on the path to recovery.


Here’s What You Need To Know:


Your Credit Score:

For some home-owners with average to below-average credit scores, there are a number of variables which will determine what they will qualify for. For current or potential home-owners who fall into an ‘in-between’ area – that is, their credit scores fall into an area around the mid-600s; lenders will specifically look at the following:

1. Your Income Stream(s):

If you are able to demonstrate a consistent, measurable and dependable source of income through a Notice of Assessment, lenders will show preference to your submission. This is referred to as ‘confirmable’ income. Traditional lenders such as banks will lend mortgages to these types of applicants; provided their overall submission also meets other requirements.

Alternatively, ‘non-confirmable’ income is commonly provided by self-employed applicants or those whose income is more fluid. This requires that the lending institution to take a ‘best-guess’ of what the applicant can dependably earn. Lenders may ask for bank statements, details regarding the nature of your business and specifics around the industry/field in which you work.

2. The Amount of Your Down Payment:

The more your put towards the down-payment of your home purchase, the more kindly a lender will look at your submission for financing. By having a higher down-payment, you’re showing to lenders that you’re willing to put more at risk on your property – and it also proves that you’ve been diligent and careful in saving your money!

3. The Amount of Equity in Your Home:

The difference between how much your home is realistically worth and how much you owe on the property. When looking to refinance your property, the maximum you can borrow is up to 85% of the value of your home. This percentage is referred to as the ‘loan-to-value’. For example, on a $300,000 home – one can refinance up to $255,000.

The lower the ‘loan-to-value’, the more in equity you have. Lenders will prefer to see a lower loan-to-value as it means that your mortgage will be lower relative to the overall value of your home; meaning that there is less risk in lending that mortgage amount to you.

4. The Value of Your Home and The Details of Your Property:

Your home will be appraised by a lender on behalf of the lending institution. The appraiser will report on the location of your home, its condition and provide an objective assessment of your home’s value – including the prices of recent sales of similar homes in your area. If you are currently working on improving a challenged credit score, lenders may deem that there is more risk to lending a mortgage on the property. The value and characteristics of your home go a long way in helping lenders to protect their investment in the scenario that the borrower cannot make their mortgage payments.

Although the big banks may have determined that your application carries some risks, that does not mean that there aren’t lenders willing to provide the financing you need to keep your property; admittedly, at a higher interest rate.

If you are currently on your way to improving your credit score in the future, but require financing today; fill out the form at the top of the page, and speak to a trusted Mortgage Expert from MonsterMortgage.ca today.