How to Get a Canadian Mortgage With Poor Credit

The process for obtaining a mortgage in Canada is similar to the process in the United States. Lenders review a borrower's income, assets and credit report, and determine his ability to repay the loan. If you have bad credit, the process can be challenging and frustrating. Most major banks will not finance borrowers with poor credit, so you will need to find other options.

Things You'll Need

  • Income documents (pay stubs)
  • Current copy of credit report

Step 1

Pull a copy of your Canadian credit report. It is possible to get a free copy of your report, but you must receive it by mail. To view an instant copy online, you will have to pay a processing fee to one of the three major credit bureaus (TransUnion, Equifax, Experian). See Resources for more information about obtaining a report.

Step 2

Review your report for inaccuracies. While you may have generally poor credit, you do not want to be punished for mistakes or inaccuracies on the report. If you find inaccuracies, draft a letter of dispute to the credit bureau.

Step 3

Begin researching lenders. Major Canadian banks--such as TD CanadaTrust--will not finance you unless you have a credit score above 720 (credit scores range from 300 to 850; scores above 720 are considered excellent). Instead, research finance companies. Wells Fargo Financial and CitiFinancial have Canadian branches and serve some subprime customers.

Step 4

Prepare to pay much higher interest rates and fees on any mortgage through a finance company. Normal origination and discount fees usually do not exceed 2 percent of the total loan amount. With a subprime mortgage, you may need to pay as much as 5 percent in fees. The Canadian government regulates all financial institutions, and the Financial Consumer Agency of Canada enforces those regulations. The most important documents you'll receive will be included after applying for a mortgage. These documents are called Clear Disclosure Documents and they will break down the interest, fees, and terms of any mortgage for which you've applied. Review these carefully with a trusted adviser--a family attorney or accountant.

Step 5

Compare loan offers side by side. Choose the loan option that not only costs the least, but also satisfies at least most of your financial goals (saving money, paying off debt).

Step 6

Research "hard-money" lenders if you cannot qualify for a subprime mortgage through a traditional lender or finance institution. Hard-money lenders are private companies that charge even higher rates and fees and often finance borrowers with extremely unfavorable terms--mainly in an attempt to foreclose.

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