If you are a victim of past bad decisions or had some financial issues, it can be hard to make large purchases due to bad credit. But did you know your dream of buying a new home can still come right even with a low credit rating? Our experts will make your dreams come true by teaching you how to get a mortgage with bad credit.

How to Get a Mortgage With Bad Credit?

There are a few steps you should follow first, starting with determining your credit score. Once you acquire your credit report, you can start to take steps to improve your credit score.

Determining Your Credit Score

In countries like Canada and the US, your credit scores are basically your reputation with banks and other financial institutions. Credit scores are also what companies look at to determine if you’re trustworthy. This is even more imperative for the real estate market since homes are expensive purchases.

That said, it is essential to know what your score and credit are in order to know if you qualify for lower interest rates and if you are eligible for things like a lower mortgage, car loans or home equity loans. 

mini house and key

There are a few ways to acquire your credit score, and the first one is to approach a paid service. These services will provide you with a detailed outline of your standing credit score and any credit issues. If you don’t feel like going with a paid service, then you are also able to get a picture of credit history through free services.

Our experts remind you that using free services to check your credit report will give you less detailed reports. However, if you would just like a brief summary of your overall score, then this is a cost-saving and quick option.

Next, our team will elaborate on credit score ranges so you have a better idea about what a low credit score is. 

There are three categories for credit scores: Over 680, 600 to 679, and below 599. If your credit rating is above 680, then congratulations, you have a very healthy credit. If the number falls into the middle category of 600-679, then your mortgage rating is fair. Of course, if you fall below 599, then you’re in the bad credit range.

Keep in mind that the credit score calculation used by different companies may yield slightly different results. For this reason, our experts suggest doing your best to keep your credit as healthy as possible.

Qualifications to Score a Mortgage

Our expert team will now detail what you need to score a mortgage. The first important document to have on hand is a copy of your credit history. This is what you can use to prove your good credit and good standing.

Mortgage Renewal

If you suspect you may have bad credit, then sometimes a pay stub or credit card payment history can also prove to the mortgage brokers that your bad credit is behind you and you are more than able to keep up with payments now.

For pre approved mortgage loans, have either your proof of assets, proof of income or both ready with your mortgage application. Again, this is proof to the mortgage lender you have the funds to make the monthly payment and down payment. Having proof of employment and not just last month’s pay stub is also a good idea as it can make sure the lender knows you have a steady financial situation.

If the lender requests any other documentation, be sure to have it prepared when you purchase your first home. You can also include anything else you can think of that will support your position and secure that loan [1] 

One extra action you can take to instantly elevate your standing is to find a reliable co-signer. Close friends, family members and even business partners can get approved as your co-signer. Even with all the above documents prepared, it can still be tough to get approved for a bad credit mortgage by a mortgage broker if you have very low credit. 

With the presence of a co-signer, it gives the lender more peace of mind as the co-signer guarantees the thousands of dollars will be paid in case you default on your home loan. Remember to check your co-signer’s credit score first, as one with better credit can sometimes even help lower the rate of the mortgages. 

Pros and Cons of Bad Credit Mortgage

Let’s say you manage to get approved for your new mortgage despite your low credit rating. Is there a downside to the situation? The first thing to be aware of is the larger down payment. You will be expected to shell out much more cash to secure your home compared to someone with better credit. While they can maybe put down as low as 5%, you will need to prepare around 20%.

canadian notes

The higher your credit is, the more trust it instills in the lenders. Besides a higher down to place on your home, you will also gain a higher interest rate. Those with good credit can qualify for a lower interest rate, but your monthly payments will be more due to the interest tacked on.

When you apply for a mortgage with bad credit, you may need to resort to a lesser-known mortgage broker or private lenders. These institutions may include difficult to meet clauses and stipulations in your loan contract and take advantage of a bad situation.

There seems to be a ton of downsides when getting a mortgage with poor credit, but it’s not all bad. For instance, if you choose a safe lender or second or third mortgage lenders, you won’t need to prepare as many documents and they won’t use the same standards to assess your situation as mainstream lenders, which means approval comes more easily. There is also a chance the lender won’t conduct a minimum credit check before approving your mortgage loan. 

You may not get the lowest mortgage rate, but private lenders are often more lenient, more flexible and are more open to discussing a payment plan that works in order for you to buy or keep your home. There is also another silver lining to getting a bad credit mortgage. The bad credit mortgage can become an avenue that repairs and improves your credit score more quickly.

Tips to Get a Mortgage Approval

The first and most obvious tip our team has for you is to improve your credit. Bad credit mortgages may be easier to get, but you don’t want to live with bad credit as it will affect your chances of not only securing a better mortgage loan, but also getting approved for new credit cards and gaining employment.

house and calculator

How can you improve your credit? You can start by paying your bills on time and making sure you never miss payments. Another trick to quickly improving your credit is to stay well below your credit line. Never max out your cards and try not to spend more than 50% of what’s allotted.

Try to find a lender that specializes in bad credit mortgages. These lenders, often also referred to as B-lenders, may charge extra fees, so keep that in mind as well. As we mentioned above, getting someone to co-sign the loan will greatly improve your chances.

The next tip is to have a higher down payment saved. You don’t want to turn to a lender and leave without the mortgage for your home because you couldn’t pay the down payment. Remember that with bad credit, you will need to prepare anywhere between 15-20% down.

Just because the terms your lenders set for your current mortgage aren’t ideal, that doesn’t mean it has to be forever. You can take steps towards better mortgage rates for your next term by following our tips above to improve your credit.

Remember that it takes time to improve your credit score, so keep at it until you make it above the 680 to 700 mark. 

Important Reminders

For your protection, our experts strongly advise not accepting mortgage rates that you know you cannot handle. If you accept a certain mortgage payment and default on these mortgage payments because of your financial situation, it will put you in an even more precarious situation. 

coins and house

Some bad credit holders will offer more documentation than needed in their effort to gain approval. Our team warns against this for your protection, and only send photocopies and keep the authentic versions for your own records.


Can I get a home loan with a 500 credit score?

Yes, you can get a home loan with a 500 credit score. You may have to turn to a B-lender or private lender, and the mortgage payments may be higher, but it’s still possible. The down payment you are expected to pay for your mortgages will also be significantly higher than someone who has a better credit score.

Can you get a mortgage with horrible credit?

Yes, you can get a mortgage with horrible credit. Some institutions give out mortgages without even checking your credit. They are experienced with bad credit mortgages but may charge you an extra processing fee.

What is the minimum credit score for a mortgage?

There is no minimum credit score for a mortgage, as there are some private mortgage lenders that don’t even conduct a credit check. However, to make things easier for yourself, try to keep your credit score above 680 for easy approval for things like credit cards and mortgages.


Although it’s not ideal to have bad credit, it’s not the end of the world. Having bad credit can affect things like getting new credit cards and loans, but it doesn’t have to get in the way of you purchasing your dream house. Follow our tips on how to get a mortgage with bad credit from a lender and take steps to improve your credit over time.

Foster Mendez

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