Skip to content
Download Consolidated Credit's Free Debt Relief Guide

Challenges of buying a home with bad credit

If you’ve got bad credit because of bankruptcy, a consumer proposal or other credit problems, it can be challenging to buy a home.

“Buying a home with bad credit is possible, but if you are a prospective buyer in this situation, you’ve got to be realistic about dealing with the challenges that will inevitably lie in your path towards homeownership,” says Jeff Schwartz, executive director, Consolidated Credit Canada.

“The reality is that you’ll likely be subject to higher mortgage rates when buying a home with bad credit. That means that homeownership will cost you more. Because of this, it is even more important to create more wiggle room in your household budget, so you’re not as vulnerable financially,” says Schwartz.

Here are some suggestions on how to improve your chances of buying a home with bad credit, get lower interest rates and better manage the costs that you’ll face.

Hurry up and wait

If you’ve declared bankruptcy or had a consumer proposal, it will likely be a couple of years at least before lenders will even consider you as a candidate to buy a home. Given the reality of this situation, you need to adjust your timeline and your expectations for the house hunt.

The good news is if you postpone your home purchase, you’ll have more time to build good credit history which can boost your credit score and make you eligible for better mortgage rates. You also have more time to save money for a down payment and emergency savings fund; there is more time to develop a working budget and to become financially literate about homeownership. These are all important parts of responsible financial homeownership.

Manage your costs

Plan to use as much as you can as down payment so that there is a healthy gap between what you own and what you owe when it comes to your mortgage. That will keep the cash flow going and leave you less likely to have to turn to more debt.

Pick the right term

If you are subject to a higher rate because of your bad credit, lock in for a shorter term for your mortgage. During this time period, you can establish your credit more solidly, which may help you to secure a better interest rate when your mortgage comes up for renewal.

Pick the right property

Some properties are considered higher risk by lenders. Select a property to purchase that is likely to sell in the event of foreclosure and you may be able to get a better interest rate. Rural properties or less in-demand properties may make it harder for you to get a better rate.

Commit to good credit

After you’ve been discharged from a consumer proposal or bankruptcy, make very sure that you always make payments on time with your credit products. If you are late, even just once or twice, that is a signal to lenders that you are likely to repeat the mistakes of your credit past.

Final Thoughts of Buying a Home with Bad Credit

Are you trying to buy a home with bad credit? We can help you establish a budget and good credit so that you can achieve that goal. Call us at (844)-402-3073 or check out our online debt analysis.

For more information on home buying, check out our home buying downloadable booklet here and video here.

Was this article helpful?

What is your total credit card debt amount?

Provide a few details about yourself.

##first_name##, here are your next steps...

Get a clear picture of your spending vs. your income. Begin your online budget and financial analysis now by clicking the button above.

Our experts are here to help you understand your options and reach your goals. After you complete the easy-to-use online budget, one of our trained counsellors will reach out to you and provide recommendations.

Everything shared is 100% confidential and secure.

I understand and agree that by choosing “Start your online budget now”, I am voluntarily providing certain personal financial information in order to educate myself as to my current financial position. I understand that this budget tool is educational in nature, and that none of the information received in the form of a budget constitutes financial advice, nor does it constitute a counselling session. I understand and agree that the budget depends on the information I input into the fields, and that Company does not represent or guarantee the accuracy of the budget. I understand that this tool may collect information and should I choose not to provide such information, I am not to proceed further. If I choose to abandon the tool midway through the process, I understand that the information will not be maintained and I would be required to start providing the information from the beginning. Company disclaims all warranties associated with the budget tool herein. I understand and agree that Company may use the contact information provided herein to contact me through various means of communications, including automated messages, and that I expressly consent to receive these messages.

Consolidated Credit Counseling Services of Canada Inc BBB accredited business profile