01 Jun Getting a Mortgage after Bankruptcy
Is it really possible to get a mortgage after bankruptcy? The answer may surprise you. Yes, it is possible – as long as you are willing to shape up your finances and be patient. Here’s what you need to know about getting a mortgage after your bankruptcy has been discharged or your consumer proposal has been completed.
Factor One – Letting Time Pass
The first factor any lender will take into account is how much time has passed since your bankruptcy. Traditional lenders will need a minimum of two years, private lenders may accept less. They will also require steady employment and proof that rent and other bills are being paid on time – see factor number two.
Factor Two – Re-establishing Credit
How you handle your finances after a bankruptcy or consumer proposal is very important. Before considering you for a loan, your lender will want to see that you’re meeting all of your financial obligations. Work on re-establishing utility bills in your own name, and never miss a payment. Make sure your rent is paid on time. Any late payments can have serious consequences – even if it’s something as small as a cell phone bill or unpaid parking ticket.
To re-establish your credit and improve your chances of getting a mortgage, slowly start using credit properly. Start with a secured credit card and always pay it on time, and always pay more than the minimum. Your mortgage professional can recommend other ways to rebuild your credit that makes sense for you.
Factor Three – Saving a Down Payment
Next, you will need to focus on saving money for a down payment. The good news is the bigger your down payment, the easier it will be to qualify for a mortgage, even after bankruptcy. Make it a priority, but only after meeting your other obligations as described above.
Factor Four – Finding the Right Lender
If less than two years have passed, or you can’t get approved through your bank quite yet, you will be forced to turn to non-traditional lenders. They can include private lenders and those who specialize in second mortgages.
Secondary lenders might be more attractive due to their more relaxed rules. These lenders are willing to take on a little more risk, but generally charge higher interest rates. Still, if buying a home is important to you and your finances have improved, using a secondary lender might be a good choice. For most, this type of loan is used as a temporary measure until they can qualify for a better mortgage, which leads us to our last factor.
Factor Five – Finding the Right Mortgage
Once you have found the right lender, ask your mortgage professional what kind of mortgage is right for your situation. In some cases, a shorter-term mortgage may be your best option. It gives you time to rebuild your credit history without locking you into higher interest rates for too long.
By working with the right mortgage professional, you can get advice on rebuilding your credit, managing your loans and refinancing when your credit improves. Although going through a bankruptcy is incredibly difficult, stressful and upsetting, life can go on. With time and perseverance, you can turn your finances around. You can rebuild the life you want for yourself and your family, which can include buying a home.
Looking for more information on bankruptcy and its issues? The Government of Canada offers lots of accurate and reliable information on their site here. Prefer to talk to someone about your specific situation? Contact us today to get free advice from one of our licensed professionals.