What is the Minimum Credit Score for Mortgage in Canada?

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The revered credit score is one of the most important factors lenders consider when you fill your mortgage application.

Three magic numbers that can be the difference between owning your dream home and having your application turned down. But despite the revered status accorded to the credit score, it is not a figure that’s set in stone.

Let’s get one thing clear; there’s no such thing as a minimum credit score. And that’s because what’s a good credit score for one lender might be bad for another.

You also need to understand it’s almost impossible to find the easiest bank to get a mortgage. Canada has one of the strongest banking institutions in the world, and this means getting a loan requires a lot of vetting to know your credit worth.

Even if you find a bank that could grant you a mortgage with a credit score within the range of 450 to 500, chances are you’ll pay an astonishing sum as your monthly rate. And that’s simply not worth it.

If you’d like the short answer to this question,  you need a minimum credit score of 600 to secure a mortgage. Anything less, and almost all the top lenders in Canada won’t approve your mortgage application.

But this only tells you half the story. As mentioned earlier, your credit score is one thing, while the interest rate is a different factor entirely. And yes, credit scores affect your mortgage rate. Here’s how your credit score influences your interest rate.

  • Excellent 760 and above. Your credit score offers you the best mortgage rate available to the lender.
  • Extremely good 700 – 759. Your credit score has minimal influence on your mortgage rate. You’re likely to be offered rates that are 0.25% higher than the best rates available.
  • Good 660 – 699. You’re beginning to feel the pinch from here. However, you’re only paying 0.5% higher than the best rates available.
  • Fair 620 – 659. Now you’re feeling the heat. You’ll pay at least 1.5% higher than the best rates available. And that’s a lot.
  • Poor 580 – 619. At this rate, you’re going to find it difficult to secure a mortgage from a major lender. And even if you succeed, prepare to pay rates that are 2-4% higher than the best rates available.
  • Extremely poor 579 and below. Now you’re in trouble. Your chances of securing a mortgage from a grade-A lender is virtually impossible. If the lender approves your mortgage, you’ll be paying insane mortgage rates.

You should use the above as a working guide. All financial circumstances are not the same, and the effect of your current credit score might be lesser or higher than what’s listed above. If you have a score that’s less than 600, it’s sound financial advice to look for ways to increase your credit score.

The alternative is to find subprime lenders who specialize in offering mortgages to Canadians with bad credit. See below to find out how to get a mortgage with bad credit in Canada.

  1. Larger Down Payments

Bad credit isn’t the end of the world as far as securing your mortgage is concerned. There are other factors lenders take into consideration before approving or denying your application. They’ll look at your annual income, the size of your debt, and the total amount you’re fronting as equity for your mortgage. The larger your down payment, the higher your chances of securing that mortgage.

Besides, you can kill two birds with one stone when you save for a larger down payment. You can also use that time to improve your credit score. A large down payment has a multiplier effect on your loan. First, it signifies to the lender you’re financially capable enough to make your monthly payments. It also means you can avoid paying mortgage default insurance.

If you need a figure in mind to save up for, try putting down enough money to cover at least 30% of the total equity of your potential home.

  1. Subprime Lenders

As mentioned earlier, subprime lenders are in the business of doing business with Canadians with poor credit. If the major lenders balk at your bad credit report and turn tail, subprime lenders will welcome you with open arms.

The downside is you will probably pay extra fees, including a processing fee that’s equivalent to 1% of the total mortgage debt. Subprime lenders are taking a risk on you so the reward has to be worth the risk.

  1. Joint Mortgage

This option is one of the most preferred routes for Canadians with bad credit who’d like to get a mortgage. Mortgage laws in Canada allows an individual to present another party who helps to co-sign a mortgage. Think of the third party as your guarantor. He or she guarantees to make your monthly payments if you default.

A joint mortgage also secures you better rates because the lender considers the creditworthiness of the third party. Sometimes, the lender will require the third party to have a vested interest in the property. This means their names will appear on the property deeds.

However, this shouldn’t deter you from taking up this option. You should consider a joint mortgage if you’re confident in your ability to make your monthly payments.

Final thoughts

Searching for the minimum credit score to secure a mortgage isn’t the final answer. You may find what you seek, but the monthly payments may cost you a fortune in the long run.

The best solution is to adjust your lifestyle and improve your credit score. Only by doing this will you have access to the best credit services in Canada.

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Kareena Maya

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Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.

Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.