Opinions diverge on how best to advise clients with little or no credit.
“I’ve dealt with clients who have no credit score and I’ve been able to secure a deal for them if they’ve paid rent long-term or if they have paid heat and utilities for a while,” Allen Cripps of Dominion Lending Centres
National told MortgageBrokerNews.ca. “If you can get ahold of their invoices, just having something that shows they have a history of paying bills on time (may be enough to get the deal).”
Cripps says he has used several lenders – from private lenders to A-lenders – to get these deals done. But he finds that opting for the private lending route at first is often the best way to go.
“Private money will be there all day long and usually when people come in for a mortgage you can put them in private money for a year before moving them to an A-lender,” he said. “It shows that they can make payments.”
Another leading broker, however, chooses a different tactic for these sorts of clients.
“Clients with no credit can still qualify with traditional lenders,” Deepak Bansal of Dominion Lending Centres Mortgage Village told MortgageBrokerNews.ca. “Many of the banks and monolines offer programs specifically for new Canadians – and these are often the type of clients who do not have credit.”
Bansal prefers traditional lenders because they offer better rates and, in the case of clients who aren’t in a rush to buy, he will advise them to build credit with a secured credit card first before applying for a mortgage.
“I would really only go to a private lender for clients with bad credit,” Bansal said.