Monday, May 2, 2011

Bad Credit Home Loans Too Easy to Come by?

Bad credit home loans used to be relatively easy to come by but times have changed and this is no longer the case. Unless you have at least 20%-25% equity in your home, you may find it challenging to qualify for a bad credit home loan.

Most banks will require that you have a minimum credit score of 680 to qualify for a conventional mortgage. If your credit score is lower, it is reasonable to assume that they will treat you as having bad credit.

Also, if you are self-employed or have difficulty proving your income you may be considered high risk, comparable to someone with bad credit.

If you have bad credit or difficulty proving your income, you can still obtain a bad credit home loan. In most cases, the best place to find this type of loan is through a local mortgage broker. Private companies and individuals generally offer bad credit home loans.

These companies and individuals entrust the mortgage broker to bring them qualified candidates and administer their mortgages. They will grant a bad credit home loan based on the equity in the applicant’s home, not based on their credit.

If a bank declines you for a mortgage, this does not mean that you are instantly a candidate for a bad credit home loan. Your credit may not be that bad at all. In the past couple of years, the major Canadian banks have tightened their lending practices making it much harder to get approved for a mortgage.

In many cases, homeowners think that they have worse credit than they actually have because the bank has declined their credit application. There are many Schedule B banks, credit unions and trust companies that offer mortgages at bank interest rates to people who don’t qualify for mortgage financingthrough the bank.

If being declined from your bank is the reason you think you have bad credit and you have not otherwise made late payments or defaulted on credit; then you may want to consider requesting your credit report. If you decide to consult a mortgage broker, they can educate you about possible issues with your financial profile at the same time discussing possible options that will lead you to achieve your financial goals.

If you have already applied to numerous lenders for home loan financing, stop. This will damage your credit score. Each application for credit in excess of 4 per year will have a negative impact on your credit score.

Before you can continue looking for home loan financing, you must first figure out how bad your credit and financial profile is. You may be pleasantly surprised to learn that it’s not as bad as you may have thought. For more information visit

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