3 Ways to Buy Your First Home with Bad Credit
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If you have less-than-perfect credit, you might be like millions of Canadians who believe that buying a home is nothing more than a pipe dream. However, you should never let your bad credit keep you from homeownership. Below, you will discover three ways to buy your first home – even if you have bad credit, you can still get bad credit mortgages.
#1 – Save Your Money
If you have bad credit and you can’t get a loan, then the best way to buy a home is to save your own funds over time. Although this can take quite a bit of time, and you will need to be not only patient, but also diligent, it can and does work for some people.
First of all, decide how much you want to save. Then, come up with an annual amount to put into savings, divide that amount by the number of paychecks you receive, and add to your savings with every paycheck. Although it is not instant gratification and it often takes years upon years of saving, you can purchase a home interest-free in this manner, and you will even earn interest on the money you put into your savings account. Anyone and everyone who can buy a house in this way should. It saves thousands of dollars over the course of a lifetime.
#2 – Bad Credit Home Loans
Although a traditional lender is likely to turn you down if you apply for a mortgage with bad credit, there are some private lenders out there who can help you. People get bad credit mortgages in Toronto from these lenders all the time, and some even obtain them immediately after their bankruptcies are discharged.
The difference in a private home loan and traditional mortgages is that you will need to come up with a much larger down payment of between 15% and 20%, and you will likely pay a higher interest rate. This interest rate may be 1% higher for someone who has minimal credit issues, but may be as much as 5% higher for someone who has a recently charged bankruptcy or other serious credit challenges.
#3 – Peer-to-Peer Loans
The peer-to-peer loan industry grows in popularity with every passing year, and many people are using this option to bypass traditional and private bad credit mortgages in Toronto. Not only do borrowers have access to attractive rates, but investors themselves see some pretty impressive returns.
Peer-to-peer loans are not without their risks, though. These mortgages are shorter-term than traditional bad credit mortgages, which means that borrowers make higher payments over shorter periods of time. This means that you, as the borrower, have very little flexibility should something happen that renders you unable to make your mortgage payments on time, and the odds of foreclosure are very real.
Out of all of these three ways to buy a house with bad credit, bad credit mortgages in Toronto from private lenders are the best choice for those who cannot save over several years. The rates are competitive and fair, and many of these lenders are willing to work with you regardless of your credit history.