How to Get a Mortgage with Bad Credit in Canada
How to Get a Mortgage with Bad Credit in Canada
Having bad credit doesn’t mean you can’t buy a home in Canada — it simply means you need the right strategy, the right lender, and a clear plan to improve your financial profile. Thousands of Canadians with bruised credit are approved for mortgages every year through alternative lenders, specialized products, and credit-rebuilding programs.
If your credit score isn’t ideal, here’s exactly how you can still secure a mortgage and take steps toward homeownership.
What Is Considered “Bad Credit” in Canada?
Credit score ranges generally look like this:
760+ = Excellent
680–759 = Good
620–679 = Fair
Under 620 = Bad / Non-traditional lending required
Most big banks prefer scores above 680, which is why many bad-credit applicants need alternative solutions.
How to Get a Mortgage with Bad Credit in Canada
1. Use an Alternative Lender or B-Lender
When banks say no, B-lenders, credit unions, and private lenders often say yes.
These lenders focus on:
Income strength
Equity or down payment
Employment stability
Debt-to-income ratios
Not just your credit score.
Minimum down payments may start at 20%, depending on score and property type.
2. Increase Your Down Payment
A larger down payment lowers lender risk and increases approval odds.
Benefits include:
Lower monthly payments
Access to more lenders
Ability to offset weaker credit
Many bad-credit borrowers get approved by offering 20–35% down.
3. Show Strong, Consistent Income
Even with bruised credit, lenders will approve borrowers who can clearly afford the mortgage.
Helpful documentation includes:
Pay stubs
Job letters
Bank deposits
Tax returns (for self-employed)
If income is strong, lenders may overlook a low score.
4. Work with a Co-Signer or Guarantor
A co-signer with strong credit can:
Strengthen your application
Reduce interest rates
Increase your borrowing power
This is one of the fastest ways to qualify despite poor credit.
5. Consider a Short-Term Bad-Credit Mortgage
Some buyers start with a 1–2 year bad-credit mortgage, then refinance once their score improves.
This strategy allows you to:
Buy now
Rebuild credit
Refinance into a lower rate later
Think of it as a stepping-stone mortgage.
6. Pay Down High-Interest Debt Before Applying
Your credit score can jump significantly by:
Reducing credit card balances
Paying off small collections
Lowering utilization below 30%
Even a small 20-point increase may qualify you for better rates.
7. Avoid New Credit Before Applying
New car loans, credit cards, or financing inquiries can hurt approval chances.
Keep your credit quiet and stable for 3–6 months before applying.
8. Get a Copy of Your Credit Report & Fix Errors
Errors happen — a lot.
You can dispute:
Old collections
Incorrect late payments
Accounts that aren’t yours
Fixing inaccuracies can dramatically improve your score and approval chances.
Bad-Credit Mortgage Options in Canada
1. B-Lenders
More flexible than banks
Rates slightly higher
Great for moderate credit issues
2. Credit Unions
Not federally regulated
More lenient on credit and income
3. Private Lenders
Fast approvals
Equity-based
Ideal for short-term solutions
Private lenders focus mainly on down payment and property value, not credit score.
Example: Bad Credit Mortgage Approval
Credit score: 580
Down payment: 25%
Income: Stable full-time employment
Debts: Low utilization
Most banks would decline.
A B-lender or private lender may approve with a 1–2 year term, allowing the borrower to rebuild credit and refinance later at lower rates.
Final Thoughts
Getting a mortgage with bad credit in Canada is absolutely possible — you just need the right lender and the right strategy. Whether you're starting with a B-lender, using a co-signer, or building a short-term plan to refinance later, there are multiple paths to homeownership even with bruised credit.
If you want, I can turn this into a RateShop-branded lead-gen page, Instagram carousel, or YouTube script explaining bad-credit mortgages for Canadian buyers.
