Mortgage advice for budget ‘bad girls’

How to understand the approval process if you have less than stellar credit

We’ve all made bad money decisions in our day. Whether it was because of a messy divorce, failed business, or excessive spending, these foolish financial decisions can become an ever present problem.

If you used to be a budget bad girl, now’s the time to start taking steps to repair your credit and make positive financial moves. First step, getting pre-approved for a ‘bad credit’ mortgage. Even budget bad girls can qualify for an affordable mortgage with the help of a Canadian mortgage broker. So put away your credit cards and polish off your saving skills – it’s time to get smart about your finances.

Understanding the bad credit approval process

Budget bad girls must first be assessed by a lender in order to ensure that they are financially stable enough to meet the terms of a bad credit loan. These terms will vary by lender, but often include the following criteria:

1. A higher minimum down payment

   One of the best ways to prove you’ve left your budget bad girl ways behind is to present a lender with a large down payment deposit. Most lenders won’t consider issuing a bad credit mortgage to anyone with less than a 15% deposit, so keep that in mind while working on your home buying budget.

2. Proof of monthly income

   Lenders don’t give money to just anyone who asks. In order to qualify for a mortgage, you must first be able to prove that you are financially capable of handling the added expense of a monthly mortgage payment. Lenders figure this out by reviewing your gross debt service ratio, or GDSR. Your GDSR is the percentage of your gross monthly income that will be eaten up covering housing costs like mortgage payments, property taxes, and utilities. Budget bad girls are advised to keep their GDSR as low as possible; 30% is a good number to shoot for.

3. A property appraisal value

   Lenders will want to know what the fair market value of your home is prior to lending you any money. If ever the lender is forced to foreclose on your property, they will then turn around and sell the property for this appraised value in order to recoup their investment.

4. A reliable co-signer

   Last but not least, it pays to have a reliable co-signer in your corner when negotiating a bad credit mortgage. The responsibilities of the co-signer are simple: if ever you are unable to make the payments on your mortgage, the co-signer is automatically responsible.

It’s never too late to get your finances back on track. Whether you have bad credit, or even no credit, a professional mortgage broker can provide you with tons of great financial advice. And remember, mortgage brokers have access to hundreds of lenders, many of which are willing to negotiate a bad credit mortgage...provided your budget bad girl days are over!