How to Buy a House With Poor Credit in Canada

You can still buy a house with poor credit in Canada, but getting approved for a mortgage may be more difficult and expensive.

Your options may include improving your credit before applying, saving a larger down payment or working with an alternative lender that accepts weaker credit profiles.

KOHO Credit Builder

KOHO Credit Builder helps Canadians establish or improve their credit history through consistent monthly payments, without relying on a traditional credit card.

With KOHO Credit Builder, you can:

• See an average credit score increase of 74 points*

• Get approved without a hard credit check or minimum deposit

• Pay no interest on the line of credit

• Track your credit score and credit report directly in the KOHO app

• Build credit history through monthly payments reported to the credit bureaus

What Credit Score Do You Need to Buy a House?

There is no single credit score that guarantees mortgage approval in Canada.

Many traditional lenders prefer borrowers with stronger credit profiles, and a score around 680 or higher may provide access to more mortgage options.

For insured mortgages, at least one borrower or guarantor generally needs a minimum credit score of 600.

A lower score does not automatically mean you cannot buy a home, but it can limit your lender options.

Can You Get a Mortgage With Bad Credit?

Yes, depending on your overall financial situation.

A lender may look at:

• Credit score

• Payment history

• Income

• Employment stability

• Existing debt

• Down payment

• Property value

• Recent collections or bankruptcies

Someone with a lower score but stable income and a large down payment may still qualify.

However, the mortgage may come with a higher interest rate or additional fees.

Save a Larger Down Payment

A larger down payment can strengthen your application.

Borrowing less reduces the lender's risk and can lower your monthly mortgage payment.

If you put down at least 20%, you generally do not need mortgage default insurance.

A larger down payment does not erase poor credit, but it may improve your options.

Do not use all of your savings for the down payment. Keep additional money for closing costs and emergencies.

Pay Down Existing Debt

Reducing debt can improve both your credit profile and mortgage affordability.

Focus on:

• Credit card balances

• Personal loans

• Lines of credit

• Other high-interest debt

Lower balances can reduce your credit utilization and monthly debt obligations.

This can make it easier to meet a lender's affordability requirements.

Make Every Payment on Time

Payment history is one of the most important parts of your credit profile.

If you are planning to buy a home, avoid new late or missed payments.

Set up automatic payments or reminders for:

• Credit cards

• Loans

• Phone bills

• Other reported accounts

Several months of consistent payments can help demonstrate improved financial behaviour.

Check Your Credit Reports for Errors

Review your Equifax and TransUnion reports before applying for a mortgage.

Look for:

• Accounts you do not recognize

• Incorrect late payments

• Wrong balances

• Duplicate collections

• Outdated information

Dispute anything that is inaccurate.

Correcting an error may improve your credit profile without requiring you to take on new credit.

Avoid Applying for New Credit

Try to avoid unnecessary credit applications before applying for a mortgage.

New applications can result in hard credit inquiries.

New loans or credit cards can also increase your monthly debt obligations.

If you are planning to buy soon, avoid financing large purchases such as a vehicle unless necessary.

Consider an Alternative Mortgage Lender

Alternative lenders may accept borrowers who do not meet traditional bank requirements.

These lenders may consider:

• Lower credit scores

• Previous bankruptcies

• Collections

• Self-employment

• Irregular income

The tradeoff is cost.

Alternative mortgages can have:

• Higher interest rates

• Lender fees

• Broker fees

• Shorter terms

• Larger down payment requirements

Compare the total cost carefully before accepting an offer.

Can a Mortgage Broker Help?

Yes.

A mortgage broker can help identify lenders that work with borrowers who have weaker credit.

This can be useful because applying directly to several lenders can create unnecessary credit inquiries.

A broker can also explain whether improving your credit first may save you more money than getting a mortgage immediately.

Can You Get a Mortgage After Bankruptcy?

Possibly.

The amount of time since your bankruptcy was discharged can affect your options.

Lenders may want to see that you have rebuilt your credit and managed new accounts responsibly.

You may also need:

• A larger down payment

• Stronger income

• Re-established credit history

• Additional documentation

Mortgage requirements vary considerably between lenders.

Can You Get a Mortgage With Collections?

It depends on the collection account and lender.

Some lenders may require outstanding collections to be paid before approving your mortgage.

Others may consider the age, amount and reason for the collection.

Leaving unpaid collections unresolved can reduce your lender options.

Review them before starting your mortgage application.

Should You Use a Co-Signer?

A co-signer with strong credit and income may help you qualify for a mortgage.

However, co-signing creates a serious financial obligation.

The co-signer becomes responsible for the mortgage if you cannot make the payments.

They should understand that the debt may also affect their own ability to borrow.

How Long Should You Wait to Improve Your Credit?

It depends on what is hurting your score.

If high credit card balances are the main problem, paying them down may help relatively quickly once updated balances are reported.

If your history includes serious missed payments, collections or bankruptcy, rebuilding can take much longer.

If buying immediately would require an expensive alternative mortgage, waiting six to twelve months to strengthen your credit could potentially improve your options.

What Should You Do Before Applying for a Mortgage?

Before applying:

1. Check both credit reports.

2. Correct any errors.

3. Pay down high balances.

4. Avoid new debt.

5. Save as much down payment as reasonably possible.

6. Keep money aside for closing costs.

7. Gather proof of income.

8. Compare traditional and alternative lenders.

9. Get mortgage pre-approval before making an offer.