Mortgage qualifications haven’t changed much in the last decade, apart from minor underwriting adjustments over time. While these subtle adjustments have led to an adaptation of mortgage underwriting, both credit and income remain of greatest importance in obtaining a mortgage for the amount needed, and at an affordable interest rate. In short, banks and lenders will always want to ensure:
- That you are a responsible borrower and manage your debts well, and
- That you can afford the mortgage they’re giving you, regardless of how small or large.
Can I get a mortgage with Bad Credit?
We’re asked daily – Can I get a mortgage with bad credit? Absolutely.
Bad credit is not a hard stop when it comes to mortgage financing. Needing good credit to obtain a mortgage is a misconception. Both B-lenders and private lenders offer mortgages to those with bad credit as high as 85% of the property value. They’ll accept credit history with active collections, delinquencies, past bankruptcy, past consumer proposals, high debt utilization, etc.
Credit is also a huge gray area now. Blemishes can often be rationalized, and exceptions are granted far more often than they once were. Since credit reporting is much more advanced now, bad-fair credit can fall in the large range of a 400 – 650 beacon score. While some lenders have minimum beacon score requirements, others have none.
If you have bad credit and are looking for a mortgage (either a purchase or a refinance), you will most likely need to explore a B-Lender mortgage or a Private Lender mortgage. When doing so, interest rates and closing costs will be higher than traditional banks, but they will help you achieve your purchase or refinance. Seldom can the Big Banks accommodate this due to their very stringent requirements.
Can I get a mortgage with No Income?
More and more, we’re getting asked – Can I get a mortgage with no income? This is more of a challenge and needs to be answered in 2 ways.
- Yes, a Private Lender is likely to help with mortgage financing to 80-85% LTV, even if you do not have a source of income.
- No, a B-Lender is unlikely to be able to help without a source of income.
It’s not unreasonable to assume that without income, you cannot afford a mortgage. Can we agree on this? If given the choice, it is always advisable not to obtain a mortgage without sufficient income, even IF a lender is willing to give it to you. Doing so only puts you at risk of default. Here’s further context.
Private Lender – While private lenders are still concerned about your ability to repay the mortgage, they can offer options that institutional lenders simply can’t. For example, they can exercise something called ‘mortgage prepayment’ which can significantly reduce or eliminate your payment for the term of the mortgage. They can sometimes cap fees to the mortgage as well, making it less of a financial strain to close. The reason for this is a result of regulation, or lack thereof when it comes to private lending. Private mortgages are always intended to be short-term solutions. It’s highly recommended to work with a very experienced and reputable brokerage when looking for private mortgage financing.
B-Lender – Being an institutional lender, backed by investors, there are guidelines and requirements for the mortgages placed on the B-Lender’s books. As such, B-Lenders follow debt servicing requirements – albeit less stringent than the major banks. Because of this, they hold firm on underwriting criteria that are of utmost importance (credit, income, debt ratios, loan-to-value, etc.). B-Lenders might not be able to help applicants with no income, but they sure are more flexible with the nature or source of income (if unconventional).
To summarize – Can you get a mortgage with bad credit or no income? Yes. Should you? That’s where we come in. Call us today for options, opinions, and a quote. (905) 455-5005.