What Does It Take To Qualify For Mortgage Post Bankruptcy
Just a quick caveat – mortgage lending can be a very grey area where exceptions are made and things trend positive or negative constantly so there really aren’t too many hard and fast rules here that don’t change over time or based on extenuating circumstances.
First we need to qualify the question – what we are looking to do specifically is qualify for an institutional or bank mortgage after bankruptcy. This is where there are specifics that need to be met in order to be approved.
1) How long until I can apply for a mortgage? – As there are many different lending options – I will speak in generalities here. It usually takes approx. 2 years after being discharged from either a consumer proposal or bankruptcy in order for the best lenders to consider you a good risk once again. In this time they are looking for a minimum re-established credit in order to consider you once again. The general consensus with lenders is that a minimum of two trade lines or new credit facilities have been established and having access to approx. $2500 in unsecured credit is suggested. Of note – secured credit cards and pre-paid cards will not assist us to this end.
2) How much down payment will I need? – When it comes to how much downpayment you will need in order to re-enter home ownership the first item to note is that the mortgage insurance companies will not work to assist in some instances. Those who are self employed and those looking to borrow their downpayment from the lender will not get much assistance here.
Barring these scenarios – if the minimum credit requirements are met – we can look to a potential of the minimum 5% down payment as our entry point into home ownership and up from there.
3) What about how my income is used to qualify for the debt? – Looking at your ability to service the mortgage debt – this is another grey area where it depends on the lender who is providing the mortgage. If mortgage insurance is involved then the government’s guidelines are overarching where 35/42 GDS/TDS is the maximum debt service for those with credit scores under 680 and 39/44 for those with higher credit scores.
Again there are exceptions here where some lenders self insure their mortgages and are more flexible with 48 and even 50% of your gross income going towards your GDS/TDS calculations. These lenders typically look for a larger percentage of a down payment though.
Mortgage Solution For Couple In Mississauga
I always have to recall a couple in Mississauga I assisted in getting a new mortgage after being discharged from their bankruptcy for I believe it was 5 or 6 years at that time. They had re-established credit and their employment was sound. The main obstacle to them moving on with their life was their perspective of their own financial past. They were under the impression that because of the negative mark the bankruptcy made on their credit that they would always be in the bank’s bad books.
Once we went over the mortgage approval for a best rate, fully featured mortgage – the tears started flowing. I believe for a lot of readers – this is what they are facing today. A rejection from their bank has left them with the feeling that there is no hope for them or that they will be at the mercy of a loan shark. This is simply not true. Even if there isn’t a perfect solution to your scenario apparent today – getting an expert’s opinion on your situation will remove any misconceptions that will keep you in a negative spot any longer than necessary. Reach out to me below and we can discuss your specific situation.