Can You Buy a House with Bad Credit in Canada? Here’s What’s Possible

access_time 18 May, 2025 06:21 pm visibility 953 | comment 0

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Why This Question Matters

Many Canadians dream of owning a home. But if you have poor credit, it may feel out of reach. Every day, we hear questions like:

Can I buy a house with terrible credit?

Will a bank approve my mortgage?

Do I need to wait years before I can buy?

The truth is: yes, you can still buy a home—even with bad credit. You just need a plan, the right help, and a lender who understands your situation.

This article explains how to do that.

Need a Trusted Guide?

At The Valley Life Real Estate Group, we help buyers with all kinds of credit backgrounds. We’ll connect you with trusted lenders, explain your options, and help you buy with confidence.

What Counts as “Bad Credit” in Canada?

Your credit score is a number that shows how you’ve handled debt. It ranges from 300 to 900.

Above 680: Good or excellent

600 to 679: Fair

Below 600: Poor or “bad” credit

Below 500: Very low and high-risk

Banks use your credit score to decide if you’re likely to repay a loan. The lower the score, the harder it can be to get a mortgage.

But bad credit is not the end of the story.

Yes—You Can Still Get a Mortgage

Even with a low score, you may still qualify for a mortgage in Canada. Here’s how it can happen:

Through a subprime lender

With a larger down payment

With help from a co-signer

By showing strong income and job stability

You’ll need to show that you can afford the home—even if your credit history isn’t perfect.

Option 1: Save a Bigger Down Payment

If you have bad credit, most lenders will want a larger down payment. The typical 5% minimum may not be enough.

Many non-bank lenders will ask for:

10% to 20% down

A letter showing where the money came from

Proof that the money is not borrowed

Saving more upfront lowers the risk for lenders and can help you qualify—even with a low score.

Option 2: Use a Co-Signer

A co-signer is someone who signs the mortgage with you. It’s usually a parent, spouse, or close family member.

This person must:

Have strong credit

Show enough income to cover the loan

Be willing to take over payments if you can’t

Adding a co-signer often makes lenders more comfortable approving the loan.

Option 3: Work with a Subprime or Private Lender

Subprime lenders are mortgage companies that help people with bad credit. They charge higher rates, but they give you a path forward.

Private lenders may also approve you, but the terms can be strict.

You will need:

A solid job and steady income

A large down payment

Lower debts and no recent bankruptcies

These mortgages are often short-term. They give you a chance to build credit, then refinance later with a regular bank.

Option 4: Use a Rent-to-Own Program

If you can’t get a mortgage yet, rent-to-own may help. You rent a home and pay extra each month. That extra amount goes toward your future down payment.

While not common in all areas, some sellers or companies offer this in BC.

This can work if:

You have income but low savings

You need time to improve your credit

You want to lock in today’s home price

Talk to a trusted realtor or lawyer before signing this kind of deal.

Option 5: Rebuild and Apply Later

If buying now won’t work, don’t give up. You can take 6–12 months to rebuild your credit.

Here’s how:

Pay every bill on time

Pay down credit cards below 30%

Avoid new loans unless necessary

Don’t miss payments or skip rent

Over time, your credit score will rise. With better credit, you’ll get better mortgage rates and more lender options.

Can You Get Government Help?

Sadly, most first-time buyer programs in Canada require good credit. But you can still qualify for:

The Home Buyers’ Plan (if you have RRSP savings)

Gifts from family for your down payment

Rebates on taxes in British Columbia

Speak with a mortgage broker to see what you can use.

Real Example: How One Family Bought with Bad Credit

We once helped a young couple in Abbotsford. They had credit scores in the low 500s, but steady income and a $45,000 down payment saved over time.

Their bank said no. But we found them a subprime lender who offered a short-term mortgage at a slightly higher rate.

Two years later, after rebuilding credit, they refinanced with a regular bank—and now pay a lower monthly amount.

The key was planning ahead and working with the right team.

Final Thoughts

So, can I buy a house with terrible credit in Canada?
Yes, you can—but you need the right tools and support.

Here’s what to do:

Know your credit score

Save as much as you can

Talk to a local realtor and mortgage broker

Explore lenders beyond the big banks

Get a plan that works for you