Mortgage Approval After A Bankruptcy Or Consumer Proposal

getting a mortgage after bankruptcy or consumer proposal

If you’ve experienced bankruptcy or a consumer proposal, you might feel like the dream of owning a home is out of reach. But here’s some good news: it’s not the end of the road. Securing a mortgage after bankruptcy is challenging, but with the right strategy and a bit of patience, it’s totally possible. Let’s walk through the steps to get you back on the path to homeownership.

1. The Possibility of a 5% Down Payment

Yes, you read that right. Even after bankruptcy or a consumer proposal, you can qualify for a mortgage with as little as a 5% down payment. But, there are a few boxes you’ll need to tick:

  • The Waiting Period: You need to be two years past the discharge date of your bankruptcy or consumer proposal.
  • The 2-2-2 Rule of Established Credit: This rule is key. It means you should have at least two forms of credit, open and active, for at least two years, with a minimum credit limit of $2,000 each.
  • A Clean Slate Post-Bankruptcy: Ensure that there have been no missed payments after your bankruptcy or consumer proposal. Missed payments can be a significant red flag for lenders.

2. When a Larger Down Payment Is Required

If you haven’t met the above criteria, you’re not out of options, but the path does change a bit:

  • Increased Down Payment: You may need to put down at least 20%, and in some cases, this could go as high as 35%.
  • Seeking Alternative Lenders: Traditional banks might not be the route forward, but alternative lenders often specialize in these kinds of mortgage scenarios.

3. Navigating Double Bankruptcy

For those who have faced bankruptcy twice, the journey differs:

  • A Heftier Down Payment: A 20% down payment becomes a necessity.
  • A Longer Wait Time: If you prefer a lower down payment such as 5% of the purchase price, you’ll have to wait 14 years after your last discharge date, which is when the bankruptcy falls off your credit report.

4. When Your Previous Home Was Part of Your Bankruptcy

If you lost a home in your bankruptcy, you’re still eligible to put as little as 5% down for a new mortgage. However, be prepared for:

  • Increased Scrutiny: Lenders will take a closer look at your application.
  • Possible Additional Requirements: Depending on the specifics of your case, you might face a longer waiting period or the need for more established credit lines.

Bankruptcy or a consumer proposal doesn’t spell the end of your homeownership goals. With the right approach and a clear understanding of what lenders are looking for, securing a mortgage is still within your reach. Remember, each situation is unique, and seeking advice from a mortgage broker can provide you with a clear roadmap tailored to your circumstances.

If you’re ready to explore your options and take the next step towards homeownership, I’m here to guide you through the process.

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