How to Buy a House With Bad Credit in Canada (2025 Guide)

Think your bad credit is the end of your homeownership dreams? Think again.

While it’s definitely more challenging, buying a house with bad credit in Canada is possible, especially in 2025, where alternative lending options and first-time buyer programs are expanding. If you’re working on rebuilding your financial profile but want to get into the market sooner rather than later, this guide breaks down exactly what to expect, how to improve your odds, and what steps you can take right now.

🧾 What’s Considered “Bad Credit” in Canada?

In Canada, credit scores range from 300 to 900. Here’s how lenders generally see it:

300–559: Poor
560–659: Fair
660–724: Good
725–759: Very Good
760–900: Excellent

If your score is below 660, most major banks will consider you high risk. But that doesn’t mean you’re out of options, it just means you’ll need a strategic plan (and possibly a different lender).

🏠 Can You Buy a House With Bad Credit in Canada?

Yes. but not through traditional banks. You’ll need to explore:

1. Alternative (B-Lenders)

These lenders (like Home Trust, Equitable Bank, or MCAP) work with borrowers who don’t qualify for A-lender (big bank) mortgages. Expect:

Higher interest rates (1–4% above standard rates)
A larger down payment (usually 20%+)
Shorter mortgage terms (often 1–3 years)

2. Private Lenders

These are individuals or firms that offer short-term mortgages to high-risk borrowers. Good as a last resort or stopgap until your credit improves.

Minimal requirements
Extremely high interest rates (8–18%)
Higher fees and legal costs

💡 Tips to Improve Your Odds of Approval

Even if your credit isn’t perfect, you can take steps to make lenders more confident in you:

✔️ Save a Larger Down Payment

Aim for at least 20% to avoid CMHC mortgage insurance and show financial stability.

✔️ Get a Co-Signer

A family member or partner with good credit can boost your application and help you qualify with better rates.

✔️ Show Stable Income

Proof of long-term, consistent income (especially from employment or self-employment) can help offset a bad credit score.

✔️ Reduce Other Debts

Pay down existing credit cards, car loans, or personal loans. Lower debt-to-income ratios improve your chances.

✔️ Write a Letter of Explanation

Be honest about your credit history and explain any past issues (like job loss, medical emergencies, or divorce). Lenders appreciate transparency.

🏦 First-Time Home Buyer Programs That Can Help

Even with bad credit, these programs may offer some relief:

🏡 First-Time Home Buyer Incentive

The federal government offers 5–10% of your home’s price as a shared equity mortgage
You repay it when you sell or refinance
Credit checks apply, but requirements are looser with certain lenders

💰 RRSP Home Buyers’ Plan

Borrow up to $35,000 from your RRSP (tax-free) toward a down payment
Credit score doesn’t affect eligibility

🏢 Provincial Rebates

Ontario, BC, and Nova Scotia offer land transfer tax rebates
Doesn’t depend on your credit

🔁 Refinance Later Once Your Credit Improves

Many bad credit buyers use a “get in and refinance later” strategy:

Use a B-lender or private mortgage to buy now
Spend 12–24 months rebuilding your credit
Refinance with a traditional lender at a lower interest rate

Buying a house with bad credit in Canada isn’t easy, but it’s absolutely doable. You’ll need to get creative, save more, and maybe accept higher interest rates temporarily. but you can get on the property ladder.

The key is knowing your options, working with a mortgage broker who understands your situation, and committing to a long-term financial strategy.

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