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What Are My Chances of Getting a Mortgage After Bankruptcy?

by | May 30, 2024


What Are My Chances of Getting a Mortgage After Bankruptcy?

Filing for bankruptcy can be a daunting experience, leaving many to wonder if they’ll ever be able to secure a mortgage again. However, the path to homeownership post-bankruptcy is not as bleak as it may seem. With the right strategies and guidance taken, such as that provided by GLM Mortgage, you can rebuild your financial standing and increase your chances of getting a mortgage.

Keeping Your Home During Bankruptcy

Many people worry about losing their homes when they file for bankruptcy. In Canada, if you file an Assignment in bankruptcy, a trustee is appointed to maximize the realization for your unsecured creditors, which includes evaluating any equity in your home. Equity is the difference between what your house is worth and what you owe on it, including your mortgage, property taxes, and other liens. If your home’s value is roughly equal to its debts, the trustee may allow you to keep the house, enabling you to continue making mortgage payments and retain your home.

If there is equity in your property, the trustee might still permit you to keep your home under the condition that you contribute an amount equal to the equity into your bankruptcy estate. This can be done through monthly payments, borrowing from a friend, or obtaining a second mortgage. Though the latter can be challenging during bankruptcy, GLM Mortgage can help you navigate these complex waters and find specialized lenders who cater to such needs.

Renewing Your Mortgage Post-Bankruptcy

When it comes time to renew your mortgage, the situation may seem uncertain. However, most banks would prefer to have you sign a mortgage renewal and continue paying off the principal and interest rather than foreclosing on your home. This approach allows banks to avoid the financial losses associated with foreclosure sales. As long as your mortgage payments are up to date, you should generally be able to renew your mortgage after bankruptcy. GLM Mortgage can assist in confirming these details with your lender, ensuring a smoother renewal process.

Buying a House After Bankruptcy

The prospect of buying a home after bankruptcy might seem far-fetched, but it’s entirely feasible. Key to this process is receiving a discharge from your bankruptcy and working diligently to rebuild your credit. Canada Mortgage and Housing Corporation (CMHC) may review your application as early as 18 months to two years after discharge if you have re-established your credit. This means obtaining a mortgage post-bankruptcy is possible, and GLM Mortgage can help you understand and navigate this timeline effectively.

Qualifying for a Mortgage After Bankruptcy

Many Canadians mistakenly believe that obtaining a mortgage after bankruptcy is nearly impossible. However, various mortgage financing options are available, especially if you work to improve your credit score. Building up your credit score should be a priority. With diligent effort, your chances of being approved by a prime lender as soon as two years after discharge are high.

Post-Bankruptcy Mortgages

To rebuild your credit after bankruptcy, getting a credit card and responsibly managing it is essential. Pay your monthly bills on time and in full whenever possible. This will help establish a positive credit history, which lenders will consider when you apply for a mortgage. GLM Mortgage can guide you through this process, helping you find suitable credit products and ensuring you stay on track.

Bankruptcy Mortgage Lenders

Two years after being discharged from bankruptcy, many prime mortgage lenders may be willing to work with you. During this period, focus on improving your credit score. If your credit score still isn’t high enough, GLM Mortgage can connect you with lenders experienced in dealing with clients with bad credit.

Consumer Proposals

A consumer proposal can be an alternative to bankruptcy, allowing you to negotiate a legally binding agreement with your creditors to pay back a portion of your debts. This can positively impact your credit score, making it easier to secure a mortgage. If your proposal is accepted and you meet your payment obligations, your credit score can improve significantly, putting you in a better position to work with prime lenders. GLM Mortgage can assist you in understanding consumer proposals and how they can benefit your financial recovery.

Essential Documentation for Post-Bankruptcy Loans

Your credit score is the most crucial piece of documentation when seeking a mortgage post-bankruptcy. Other factors include your income, the loan-to-value ratio of the property, the property’s condition, and any other assets you may have. GLM Mortgage can help you compile and present this information effectively to potential lenders.

Building Your Down Payment

A larger down payment can be a significant advantage when applying for a mortgage post-bankruptcy. Use any extra income to save for a substantial down payment, which can help convince lenders of your financial stability. GLM Mortgage can offer advice on saving strategies and how to improve your financial position.

Timely Payments and Credit Management

Never miss a payment again. Post-bankruptcy, your credit management will be closely scrutinized. Be the perfect borrower by making all minimum payments on time and keeping outstanding balances low. This behavior is crucial for rebuilding your credit score. GLM Mortgage can provide tips and resources to help you manage your credit effectively.

Improving Your Credit Score

Before applying for a mortgage, take steps to improve your credit score. Consider taking out an RRSP loan, applying for a secured credit card, or a car loan. Establishing a positive credit history is critical, and GLM Mortgage can help you find the right financial products to boost your credit score.

Patience and Persistence

While it might take time, you don’t have to wait for your bankruptcy to disappear from your record to secure a mortgage. Many prime lenders will consider your application two years post-discharge if you have re-established your credit. GLM Mortgage can guide you through this period, helping you maintain good credit standing and preparing you for your mortgage application.

In conclusion, securing a mortgage after bankruptcy is challenging but achievable with the right approach and support. GLM Mortgage is here to help you navigate this journey, offering expert advice and tailored solutions to help you rebuild your financial future and achieve your dream of homeownership.

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