Buying a Markham home will most likely be the largest purchase that you make, so you’ll want to make sure everything is perfect for the transaction. If you have bad credit, there is a pretty big likelihood that you will be turned down for a traditional A-class mortgage. You will need to figure out other options or work on repairing your credit so you can move forward and buy a home.
Different classes of mortgage
A-type lenders are top-tier lenders like banks or credit unions who have a good standing in Canada. B-type lenders may give you a mortgage when you don’t meet the A-class lender requirements. These can include good credit or income or if you are self-employed. With B lenders, interest rates are usually higher and a higher down payment (at least 15%) is required. Many clients of B lenders in Markham do shorter terms so that they can switch to an A lender once they do satisfy their requirements. If higher interest rates and down payments don’t sound good to you, you may want to just work on repairing your credit and waiting to buy a home.
High debt ratio
A number of factors go into your credit score and one of them is having a high debt ratio. This could be because of the presence of a number of loans or having credit cards that are maxed out. In order to fix this issue and increase your credit rating, you’ll need to pay down your debts.
If you’ve had trouble paying your bills and had items go to collections, you can’t change that now. What you can do is pay these debts and then ask the creditor to remove them from your report. You should always have a current copy of your credit report, so you can ensure there is nothing erroneous on it. If there is, ensure that you get it removed promptly.
If you are unable to make the payments on the debts and collections you currently have, bankruptcy, credit counseling or consumer proposals may be your best option. These options definitely won’t repair your credit as your score will take a hit, but they’ll get you to a place where you can pay your bills and start repairing your credit.
Buying a home in Markham is a decision that shouldn’t be taken lightly and if you are having trouble paying your bills, your best option may be to wait. Work hard to pay off your debt by coming up with strategies to increase income and/or reduce spending and be realistic with what you can afford.