Getting a Mortgage after Bankruptcy

Sometimes life throws you a financial curveball. Bankruptcy

and consumer proposals happen. It doesn’t mean your life is

over, and it doesn’t mean you won’t ever qualify for a mortgage

again.

The key to financial success here is getting things under control

as quickly as possible. You must demonstrate to the potential

lenders that what happened in the past won’t happen again in

the future.

So if you’re thinking about getting a mortgage post-

bankruptcy, lenders will want answers to the following

questions:

How long have you been discharged?

Securing a mortgage will be dependent on how long it has been

since you were discharged from your bankruptcy or consumer

proposal. Most lenders consider the discharge date on both to

be your new ground zero.

And while there is no legally defined waiting period for when

you can apply for a new mortgage post-bankruptcy, what

lenders will assess is how you’re managing your finances after

your financial troubles.

Have you established new credit?

You can show lenders that they can trust you after bankruptcy

by establishing new credit and managing that credit flawlessly.

So as soon as you’ve been discharged, it’s a good idea to get a

secured credit card and start rebuilding your credit score.

To be considered completely established, you’ll want to have

two years of credit history on two trade lines with a credit limit

of $2500 on each trade line. You’ll also want to make sure that

you have no late or missed payments.

How much do you have available for a downpayment?

The more money you have to put towards purchasing a

property, or the more equity you have in your property in the

case of a refinance, the better your chances of getting a

mortgage. The more money you bring to the table, the more

comfortable a lender will feel about the risk they take of losing

their investment should you run into future financial difficulty.

What is your total debt service ratio?

Another consideration lenders will look at is how much money

you make compared to the cost of making your mortgage

payments. So it probably goes without saying that the more

money you make compared to the amount you want to borrow,

the better.

Conventional or insured financing.

If you’re looking to get the best mortgage products available,

here are some of the things a lender will want to see:

● You’ve been discharged for at least two years plus a

day.

● You’ve established your credit (as listed above).

● You have at least 5% down for the first $500k of the

purchase and 10% down for anything over $500k.

● If you don’t have a 20% downpayment, you will be

required to secure mortgage insurance through CMHC,

Sagen (formerly Genworth), or Canada Guaranty.

● The cost to service the property and all your debts

don’t exceed 44% of your gross income.

Alternative lending

As independent mortgage professionals, our job is to provide

solutions and strategies for our clients. As such, in addition to

dealing with many traditional lending institutions, we also have

access to lenders who specialize in working with clients whose

financial situation isn't all that straightforward. These private

lenders offer alternative lending solutions that consider the

overall strength of your mortgage application.

While you won’t qualify for the best rates and terms on the

market by going with an alternative lender, if you’re looking for

options, you might find that alternative lending is a very

reasonable solution for you. Alternative lending isn’t for

everyone, but it’s an excellent solution for some, especially if

you’ve gone through a bankruptcy or consumer proposal and

need a mortgage before fully establishing your credit.

Get in touch anytime.

So whether you’re looking for a plan to help you qualify for a

mortgage with the most favourable terms or if you need

something more immediate. Please connect anytime. It would

be a pleasure to outline your options and work on a plan to get

you a mortgage.