Poor credit: How a private mortgage can let you own property
A poor credit file shouldn’t necessarily keep you from a life project as important as buying property. No one is immune to difficult financial situations, and anyone who has regained control over their budget should have a second chance to get a mortgage. If conventional financial institutions keep putting up roadblocks, I’ll explain how and why a private mortgage can help you achieve your goal of owning real estate.
You are not defined by your credit file
The credit file compiled by Equifax and TransUnion, with their unclear point systems, is a far-from-perfect tool. It’s obvious to me that it is an outdated, if not archaic, system. Certainly, a credit rating can offer a vague idea of your profile as a consumer and borrower, but it only reveals a small part of your history. Not only do we often find mistakes in the file, but the credit rating is calculated from data that can easily distort reality.
Unfortunately, the banks or Desjardins branch advisors no longer have much freedom to judge your actual capacity to repay a mortgage. Instead, it’s the computer that decides.
After talking to several mortgage brokers, I can confirm that many people have suffered for the small errors of their youth or for simple oversights. Some, investors and self-employed people, who are visibly financially well off, can also have trouble getting a loan.
If you have a credit rating under 600 (out of 900), the banks won’t touch you, even if you’ve resolved the situation, earn a good salary and have the down payment needed. You’re just a number, one of the millions of clients—despite what their ad campaigns want us to believe.
The advantages of private mortgage financing
An analysis rooted in reality
Unlike the mortgage advisors of a bank or credit union, a private lender is able to analyze your request for financing based on your current financial reality. They aren’t forced to base their decision on a flawed credit rating to help you buy a home.
In fact, private mortgages are generally approved on the basis of the desired property’s market value. And, naturally, your income and ability to repay also come into play.
Here, we judge the financial transaction on its own merits. Abstract scores, ratings and debt ratios have no impact. To put it frankly, we don’t care if you took a few months longer to pay off your car loan in 2015. And we won’t penalize you because you’re a savvy investor who uses debt as financial leverage.
A fast, simple approval system
While conventional mortgage lenders love paperwork and endless procedures, private lenders value efficiency.
Just take a few minutes to fill out an Online Financing Application to determine the amount you could get.
A request for financing that doesn’t impact your credit file
Did you know that just submitting a financing request with a bank can affect your rating?
It’s true. If you approach several institutions for a loan, this is considered a worrisome sign by the Equifax and TransUnion credit agencies, who can reduce your credit rating.
But that’s not the case for an alternative financing solution with Victoria Financial, because no credit investigation is required at the time of the request for financing.
Flexible terms, according to your needs
The repayment terms of conventional mortgages can be restrictive. As absurd as this sounds, you may not be able to pay part of the interest in advance to reduce your monthly payments.
Since private lenders are not governed by strict corporate policies, they have the freedom to offer terms that are adapted to your needs, such as reduced monthly payments or the opportunity to pay the interest in advance.
Criteria to get private financing
Eligibility criteria vary from one lender to another. Here are the main criteria at Victoria Financial:
- The property must be a single-family home, a condo or a commercial or income building.
- The property must be located in a serviced urban area.
- The amount of financing must be equal to or less than 75% of the value of the property.
This last criterion of course implies that you have accumulated a comfortable sum to invest in a property. As I mentioned earlier, even if you’ve made a big effort to save and show budgetary discipline, the banks still risk ignoring you for as trifling a reason as an old cellphone bill that wasn’t paid. And if you’ve had the misfortune of going through a difficult period in the last few years that forced you into debt consolidation, consumer proposal or bankruptcy, your odds of getting a mortgage from a conventional bank are practically zero.
Thankfully, the private lender has the vision needed to recognize that you are not defined by your past.
I admit I’ve been a bit harsh with the banks and credit unions. But I think it’s fair enough when we see how they use their virtual monopoly to decide your future. They obviously have a role to play and are a must for those who want to only put down 5% on a property.
But if they keep putting wrenches in the wheels of your life plans, it’s time to consider a private mortgage.
It doesn’t cost anything to explore this solution. And you won’t have to worry about it making a negative impact on your credit file.