Mortgage loan after declaring bankruptcy

Many Canadians believe that after filing for bankruptcy, obtaining a mortgage is an impossible feat. But this is far from the truth. There are a number of mortgage financing options available to those who have declared bankruptcy in the past.

The main criterion that will determine which lender will do business with you is your credit rating or FICO score. So after bankruptcy, improving your score should be a priority. If you work diligently to improve your score, your chances of being approved by a traditional lender within the first two years after discharge are quite high.

Mortgages after bankruptcy

After bankruptcy, you should get a credit card to begin rebuilding your credit. Take the initiative to rebuild your credit history with a fresh financial start. Make sure you keep up with your monthly payments and pay your credit card bill on time and if possible, in full. By doing so you will rebuild your credit, and lenders will take this into consideration when you apply for a mortgage.

Mortgage lender to those who have made bankrupt

Most traditional mortgage lenders should be able to provide you with a mortgage two years after your discharge from bankruptcy. That said, the two-year period is from the time you are discharged, not from the time you file for bankruptcy.

So, 24 months later, you could potentially have time to rebuild your credit score so that you are in a position where some traditional lenders will look at your file. If your credit is still not strong enough, check out lenders who have experience with clients with bad credit.

Consumer proposals

Consumer proposals are a way to avoid bankruptcy by negotiating a legal agreement with your creditors. Instead of filing for bankruptcy, you can offer to pay a portion of each of your debts. The people who hold your debts must agree, of course.

For example, let’s say you owe $50,000 spread over credit cards, lines of credit, car loans, and other debts. You currently have a job and can afford to make some payments, but cannot pay the full amount.

You can connect with a consumer proposal administrator who will help you build your proposal. You propose to pay a monthly sum of, say, $400 for the next 4 years, which will amount to $19,200. Each of your creditors will vote on the proposal and if they all agree, at the end of the agreement and your payments, you all eliminate the debt owed.

In order for your creditors to accept the proposal, you must offer to pay more than they would have received if you had declared bankruptcy. Your administrator can help you estimate this amount.

If the creditors accept your proposal, your credit will be in good shape once you pay them off. At that point, your credit will be at a reasonable level and would likely have passed the 600 range. 600 is not a huge credit score, however, it may be sufficient for mortgage lenders. If your credit score is not high enough, then your best option is to contact a lender that deals with bad credit clients or a private lender.

Most important documents

Your credit rating will be the most important element when trying to get a loan from a mortgage lender after you have filed for bankruptcy. Other criteria include:

• Your income
• Loan to value ratio of the property
• Value and condition of the property
• Other assets you may have

Since your credit score is the main factor that determines whether the lender will want to do business with you, start building your FICO score as soon as possible. A traditional lender can usually offer you the lowest mortgage rates on the market so you choose their services. However, if you are turned down by traditional lenders, you still have the option of working with other lenders who deal specifically with customers with bad credit. Your last option is to deal with a private mortgage lender who will evaluate your case on an individual basis and determine if you are a good client to take on.