Is it possible to successfully obtain a mortgage after a Bankruptcy?

Many Canadians find themselves bogged down with a poor credit rating resulting from situations out of their control—illness, losing a job, or simply not understanding how to handle their credit.

Unsatisfactory financial situations can happen to good people and bankruptcy is sometimes the only option. If you have a bankruptcy it is very important to begin repairing your credit and getting back on track as soon the bankruptcy has been discharged.

Different lenders have different criteria regarding the length of time after a bankruptcy discharges as to when they will consider granting a mortgage.

Typical is two years along with proof of re-established credit. A bankruptcy will remain on your credit bureau for up to seven years.

A private or alternate lender will consider approving a client with a more recent bankruptcy provided the borrower can demonstrate they are now a good credit risk and have a decent down payment with income to support the mortgage payments.

The reasons for a bankruptcy are very important to a lender when considering a new mortgage application. If it was due to factors beyond your control that is more acceptable to the lender than if it were the result of excessive debt and poor money management.

Typically a 10 per cent down payment is required after a two year discharge and the down payment must come from your own resources. Gifted down payments are not considered.

Depending on the time lapse since the bankruptcy has been discharged, some lenders will charge a higher rate and in some cases a fee.

A lender will grant a more favorable rate if certain lending criteria have been met. The important factors considered by a lender two years after bankruptcy has been discharged are good re-established credit, minimum beacon score, down payment from your own resources, good debt servicing ratios and good job stability.

Re-established credit is most important as it demonstrates to the lender that a prospective borrower has new credit and has managed it as agreed since the bankruptcy.

Typically a lender will look for two lines of well established credit for two years. A missed payment during this stage could very well be grounds for the mortgage application to be declined.

Mortgage consultants will provide valuable advice and work with you through the process of repairing your credit and preparing you for home ownership.

Of Prime Interest is a collaboration of mortgage professionals Trish Balaberde (250-470-8324), trishb@creativemortgage.ca; Darwyn Sloat (250-718-4117), dsloat@creativemortgage.ca; Christine Hawkins (250-826-2001), christine@creativemortgage.ca.

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