101 Series – How to Buy a Vancouver Home with a Poor Credit Score – Bruce Coleman Vancouver Mortgage Broker
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Home Buying 101
How to Buy a Vancouver Home with a Poor Credit Score
Spending beyond your means is common today. Sometimes you get financially jammed up and get behind on those blasted credit cards and other bills.
This scenario can negatively affect your mortgage application. If you’re still struggling to make ends meet then buying a home should maybe be put on hold.
But, if you’re back on track and caught up on your debts then maybe you might be ready to tackle a new home. Your credit score is a reflection of how well you can manage the responsibility of taking on a mortgage.
There are two strategies that you can adopt to improve your chance of getting approved by lenders as the new B20 regulations (Underwriting Guidelines for Residential Mortgages) introduced by the Feds have made getting approved even more of a challenge.
Worst Case Scenario – Recent Bankruptcy
If you’ve recently declared bankruptcy or have made a credit proposal, then your best strategy to use in not only getting approved but qualifying for a decent rate is to hold off and wait it out for awhile.
Your only option at best in these circumstances when it comes to applying for Vancouver home mortgages is to hope that you get approved for a subprime rate. These were somewhat easier to get before the new regulations.
Right now however, it’s a tough sell as many lenders have tightened their belts and are performing a more rigorous due diligence when it comes to applications.
The majority of conventional lenders won’t even give you the time of day until you’ve managed to get 2 years beyond your bankruptcy discharge or credit proposal. You will also need to have qualified for at least 2 sources of credit that have at least a $1000 or $2000 limit with a 2 year track history of paying your debt on time.
If this fits your situation then you might be concerned how you are even going to get approved for any credit card. Well, you can as there are credit cards which you can apply for and these are called “secured credit cards.”
These “secured” credit cards require a security deposit before you are approved but they can help reinstate your credit rating and get you back in financial shape again. You also want to make certain that you choose a lender which will guarantee they will refund your security deposit after a certain period of time.
To rebuild the confidence in lenders you need to make sure that all your bills are paid on time including your household bills so you can rebuild your credit score again. You have to make a plan and stick to that plan and above all else you must be patient.
The More Expensive Approach
Even though you have declared bankruptcy or going through the process of a credit proposal it could be that your financial situation has improved so dramatically you believe you can swing a mortgage. You want a home now, but is it possible even with your circumstances?
It’s by no means impossible but you better be prepared to pay the price. Your best bet will be with a subprime mortgage and that’s going to mean higher interest rates. You will also have to be prepared to put down a fairly substantial down payment of at least 25% if not even more before a lender will give your application any credence.
You may also have fork out between 1 – 2%, and maybe even more for a broker or lender’s fee.
It’s a lot tougher to find subprime mortgages but they are out there.
If you got the cash for a down payment and are still determined to buy a home then you most definitely want to use an experience mortgage broker like me to evaluate and assist with your particular circumstances.
Bruce Coleman, Vancouver Mortgage Broker