Thinking about refinancing your home?   Maybe buying your first home?  Perhaps you are aiming to reduce your current interest rate, or perhaps consolidating other consumer debt, auto payment and mortgage into a single, lower payment.

Regardless the purpose of your mortgage, getting approved is relatively easy when your credit is bankable; your mortgage can be set up with any of the mainstream financial institutions. 

But, what if your credit is less than perfect?

Over the past while we have seen changes to lending guidelines for mortgage qualifications.

Major changes: 

Gone is the No down payment mortgage and the refinance up to 100% of property value.  

 A borrower may no longer purchase a home if they have no down payment regardless of how good their credit may be.  Used to be that a zero down mortgage could have been arranged for people whose credit scores were over 680, or for those that had some credit issues, a credit score of 600, provided their issues were all in the past and have a demonstrated good repayment history on recent credit.

The high insured ration mortgage continues to be a Canadian favorite especially among first time buyers.  A minimum down payment of 5% is required, but credi must be at least over 600 and any credit issues must have been in the past and usually on an isolated case.  When the down payment is between 5 to 19.99% the mortgage must be insured with default insurance by the lender.  There are 3 companies insuring in Canada;  CMHC ( Canada Mortgage and Housing Corporation), Genworth Financial, and AIG.

For those that need to borrow 80% or less of the value of the home, the mortgage would be a conventional one, where no default insurance is required.  Qualifying for a conventional mortgage  is easier because the lending bank will not need to refer the your mortgage to the insurance company for approval, however any mainstream  lender will still require the borrower to have demonstrated a good repayment history, all accounts be up to date, and any credit issues resolved, be in the past, and or be isolated incidences which can be explained.

Conventional mortgages can also be obtained through B lenders, which at a higher rate of interest, will assume a larger risk.  In cases where credit is very challenged,  income cannot be proved, or income is not sufficient to carry the mortgage debt, and other consumer debts, private lending can be the solution. 

Private mortgages, at a higher premium, tend to focus more on the value of the underlying asset, the value of your home in relation to your amount of down payment.  The location of your home is important, and usually lenders look to lend on properties that are in urban centers with good real estate values.

If you are a home buyer, or a current homeower needing to consolidate or refinance your current mortgage, it is wise to know your options, and to deal with a mortgage broker who understands the issues and puts your interest before anyone else’s. 

A good mortgage broker will explain to you all your options, and advise your accordingly.  Look for a broker that will assist your in moving your mortgage in a few years time, when your credit has improved. 

If your credit is good, a broker can help you save valuable time, find you a mortgage at competitive rates, and a mortgage products that has the features and options better suited to your particular circumstances.