Buying a home is one of life’s most significant decisions. But if your credit history is less than perfect, securing a mortgage can feel like a steep uphill climb, especially with Canada’s strict lending standards. Banks and traditional lenders prefer borrowers with clean credit reports, consistent income, and low debt. But what if your credit score is not quite where it needs to be?
The good news is that buying a home in Ontario is still possible even with a poor credit score. You need to understand your options and be willing to take a few extra steps to get there.
What Is Bad Credit in Canada?
Credit scores in Canada range from 300 to 900. Generally:
- 650+ is considered good
- 600-649 is fair
- Below 600 is typically viewed as poor
If you are under that 600 threshold, most major banks will consider you high risk. This can mean higher interest rates, strict borrowing limits, or even being declined altogether.
What drags a score down? Common culprits include:
- Late or missed bill payments
- High balances on credit cards (aka credit utilization)
- Negative marks, such as a consumer proposal or collection account
But even with a poor score, it does not mean you are completely shut out of the market.
Can You Get a Mortgage After a Consumer Proposal?
Yes, it is possible—but it is more complicated.
A consumer proposal is a formal agreement to settle your debt for less than you owe. It can offer financial relief, but it also damages your credit. The proposal stays on your report for up to six years from the date you filed it, which can scare off many traditional lenders.
Still, it does not make buying a home impossible. You will need to be strategic. Here is how:
Steps to Improve Your Chances Post-Proposal:
- Finish the proposal first. Most lenders won’t consider your application until it is fully discharged.
- Pull your credit report to make sure everything is reported accurately.
- Start rebuilding credit with a secured credit card. Make small purchases and always pay them off in full and on time.
- Add a second credit line—most lenders want to see at least two active credit accounts with a combined limit of $3,000+.
- Aim for a credit score of 700 before applying to boost your approval odds.
- Save a larger down payment. 20% or more is ideal for applying without CMHC mortgage insurance.
- Work with a mortgage broker who understands post-proposal applications.
- Be ready to explain your financial history and show proof of stable income.
Getting a Mortgage With Bad Credit: What Are Your Options?
If the big banks have said no, you still have other choices. Here is how you can qualify:
1. Show Stable Income
Proof of steady employment (or consistent income if you’re self-employed) can go a long way in reassuring lenders.
2. Reduce Your Debt
The less debt you carry, the better your credit score and the more comfortable a lender will feel approving you. If your debt is overwhelming, a consumer proposal might be worth considering to wipe the slate clean.
3. Save More for a Down Payment
Putting down more money upfront reduces the lender’s risk and increases your chances of getting approved.
4. Use a Mortgage Broker
Mortgage brokers have access to alternative and private lenders who are more flexible with credit requirements. They’ll shop the market to find the right product for your situation.
5. Consider a Co-Signer
A co-signer with good credit can boost your application. Just remember they’ll be legally responsible for the loan if you can’t make the payments.
Risks of Getting a Mortgage With Bad Credit
While getting approved is possible, it is essential to be aware of the trade-offs:
- Higher interest rates – You’ll likely pay more over the life of the loan
- Larger down payments – Some lenders may require 20% or more upfront
- Shorter loan terms – These often come with more frequent renewals and less favourable terms
- Foreclosure risk – Falling behind on payments could put your home at risk
If your finances are tight, a bad credit mortgage is not the right move. Make sure you’re financially ready to take on the responsibility.
Should You Speak to a Licensed Insolvency Trustee?
If your debt load keeps you from getting approved or making ends meet, it might be time to consult a Licensed Insolvency Trustee (LIT). These professionals can help you assess your financial health and explain debt relief options like:
- Consumer proposals
- Bankruptcy
- Debt restructuring
This can allow you to get back on track financially and plan for homeownership.
Final Thoughts: Don’t Let Bad Credit Stop You From Owning a Home
Before committing to a high-interest mortgage that could strain your budget, it is essential to explore all your options with the help of a Licensed Insolvency Trustee (LIT).
At Mortgage Assurance, we have helped thousands of Ontarians understand their financial situation and make informed decisions—whether qualifying for a mortgage with bad credit, rebuilding their credit score, or choosing a more manageable solution like a consumer proposal.
Our goal is to ensure that homeownership becomes a step toward financial stability, not a setback, by offering honest, personalized guidance every step of the way.
