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Can You Really get a Mortgage Without a Down Payment?

7 November, 2011 / by Bryan Jaskolka

There’s always a lot of talk about how people with bad credit have the money for a monthly mortgage payment, and maybe even have money for a down payment. But because they don’t have the necessary credit, they think that being approved for a home loan is out of their reach. But what about the flip side? What about those who have an impeccable credit history, but no money for a down payment? Is it still possible for those who fall into this group to obtain a mortgage?
Of course! There’s nothing that lenders love more than those with good credit. And that’s why “zero down payment mortgages” are still available in Canada. And they really are as good as they sound. You can still be approved for a home loan, and not have to pay a cent down payment. And, unlike small down payments made by those with not-so-spotless credit, you also won’t have to pay mortgage insurance. So what’s the catch?
The only catch (and why everyone you know isn’t bragging about their zero down payment mortgage,) is that only those with flawless credit are approved. These types of mortgages require the lender to cover you for 100% of the loan, a risky move on their part. And they’re not going to be willing to do that for just anybody. There are a few strict (and we mean strict) requirements you’ll need to meet before getting a zero down payment mortgage.
The first and most important requirement for a zero down mortgage is that you must have flawless credit. If you’ve been more than one month late on a credit card payment in the past two years, you will not be approved for a zero down mortgage. Also, while it’s fine to have had another mortgage, second mortgage, or other type of home loan, it’s not okay if you’ve been late on those payments – not even one. In fact, if you’ve ever been late on a mortgage or loan payment, you will not be approved for a zero down mortgage.
Bankruptcies and orderly payments of debts, an alternative to bankruptcy in Canada, will also make you ineligible for a zero down payment mortgage. However, these two only apply over the past 7 years so if it’s been longer than that, you could still obtain a no down payment mortgage.
Other than a spotless credit history, the only other thing most lenders require for a no down payment mortgage is that you’ve been at your current employer for at least two years. Once you meet those two requirements, you just need to find a lender that offers them. Not all of them do, though there are many in Canada. A good mortgage broker that has access to hundreds of different lenders throughout the country is your best bet at finding a lender that does!