Buying a House in Canada

Buying a House in Canada

Bad credit can set anyone up for financial failure in the future. Bad credit can keep average Canadians from borrowing money to purchase things essential for a modern life, such as a housing loan. Banks, which are the biggest provider of housing loans, rarely look twice at a mortgage application with a history of bad credit. Borrowers with bad credit are considered to be at high risk for delinquency.

my-dreamThere’s little that a mortgage applicant with bad credit can do to convince a bank otherwise in a short period of time. Rather than letting go of your dreams of owning a home in Canada, it’s better to look at ways to improve the situation. Basically, housing loan applicants with bad credit have three options to own a home: the first is to work hard and save enough money, the second is to improve current credit, and the third is to apply for a bad credit mortgage.

Saving Money to Buy a House

The first option—to save enough money to buy a house—is the hardest one, possibly unreachable for many. If a Canadian has bad credit, that means he or she has borrowed money a lot. It’s possible that the person earns only low wages, has high-interest generating loan or has other expenses that require constant borrowing. It’s obviously very difficult to save in a situation like this. Even if the person manages to put aside a certain amount of money, he or she will have to save for decades until there’s enough to buy a house. It’s possible to save just enough to start a business to make profitable income. However, hitting the jackpot like this is a highly unlikely scenario. Therefore, it’s best to consider one of the other two options instead.

Improving Bad Credit

The second way to buy a house with bad credit in Canada is to improve the credit rating, and then apply for a mortgage. Bad credit is not a life sentence. It’s possible to make tarnished credit histories look good again to a bank or a traditional housing lender. Improving bad credit is as simple as paying down debt. Then again, as people with bad credit may already know, it can be very difficult to pay down debt: If the debtor has a good strategy, however, it is entirely possible to be debt-free with a stellar credit rating.

In order to pay down debt, the debtors should first make a budget to eliminate all unnecessary expenses and use the funds towards paying off the bills. Some loans may incur sky-high interest rates. If this is the case and the debtor is close to a default, it’s possible to renegotiate the debt: Creditors don’t benefit from defaulted loans and might write off a portion of it. Use tactics such as this to eliminate debt, which will naturally improve the credit rating, which in turn will open the doors for a conventional housing loan.

Bad Credit Mortgages

The final, and the most likely, option for buying a house with bad credit is to take out a special bad credit loan. Debtors will not have to wait until debt is paid down and credit ratings have improved to own a house this way.

Bad credit mortgages, like the name suggests, are type of housing loans that are offered exclusively to applicants with bad credit. So, bad credit is not a reason for disqualification. As long as applicants have a steady source of income, they can obtain a bad credit housing loan to buy a home without delay.

Many small-time lenders in Canada now offer these alternative mortgages, which are designed after similar types of housing loans were introduced in the United States. The biggest con is that alternative mortgages have higher interest rates than regular mortgages.

If you are a borrower with bad credit, carefully consider the above three options if you are hoping to buy a home. Seek advice regarding whether you should wait another two or three years to improve your current rating and apply for a conventional mortgage, or to go ahead with a bad credit mortgage right now.

Budgeting Guide for Low-Income Canadians

Budgeting Guide for Low-Income Canadians

Canada may be a high-income nation, but 1 in every 7 Canadians lives in poverty, according to advocacy groups. In 2011, close to 13 percent of the population was living off low wages. The number has not significantly improved still. As Canada’s once dominant natural resources industry falters, many are left jobless and without a steady source of income.

For low-income Canadians struggling to find a job that pays well, personal finances can be a nightmare at times. It’s easy to become prey to payday lenders and financial scams when one is poor. Most low-income families end up in vicious cycles of borrowing, spending and borrowing even more. There’s only one way to break this cycle and ease financial woes related to low wages: budgeting.

blue-houseBudgeting is for everyone, rich or poor. For the poor saddled with debt, budgeting is a necessity to survive. If you spend more than you earn, it’s a glaring indicator that you will end up deep in debt, which is not a good situation to be in especially if your income is already low. Therefore, here are the budgeting essentials Canadians with low income should follow:

Set Goals

If you set goals before you start budgeting, it will help you stay focused throughout your endeavour. For example, perhaps by budgeting you want to become debt free, or you might want to budget to save money for a degree. Envision where you want to be in the future, and how your budget will help. Use that to motivate yourself.

Budget Together

If you are married, it’s important to budget together, even if only one person is earning an income. Couples who live together and have families together should manage finances together as well if the budget is to work. After all, if the debt is not paid off, it will affect both parties, not just the one making money.

Track Expenses

Step one of budgeting is to track expenses. This requires some patience and time. To start budgeting, make a chart to note down all income and expenses. The expenditures should be categorised as “groceries,” “medicine,” “utility bills,” “transport,” and so on. Spend at least a month religiously noting down all expenses and the money you earn. Do not leave a single expense out.

Once you have your expenditures chart, you will be able to see exactly where your income is going. If you type in the data to a program like Excel, you can even make an actual chart to see which aspect of your life is the most expensive. You can start budgeting after you know your finances.

Make a Plan

Your income should exceed your expenses. This should be the main aim of budgeting. Make note of the expenses in your chart and divide the essential expenses from the ones that are not. For example, paying off the mortgage, electricity bills, food and medicine are essential expenses. Buying new clothes or eating out on the weekend are not. After you make the categorisation, you will have to make cutbacks from your inessential expenses section and add to the expenses section. For example, if you spend $100 each month eating out, you will have to completely eliminate that expense, and use the money towards something essential, like paying off the mortgage. It will be difficult at first, but making the necessary cutbacks is crucial to getting your budget in shape.

Manage Debt Wisely

Once you have more money to funnel into reducing debt, use it wisely. Pay off high-interest incurring loans first. Save some money each month so you don’t have to borrow all the time. Learn to get all your impulsive buying habits under control if you want to be debt free one day.

The most important aspect of managing the budget is to stay committed. It will be rough at first to not indulge yourself once in a while. When that happens, imagine all the good things that will happen because of your budget, and don’t stray off the path.