Bankruptcy happens. Sometimes good people get put into bad situations and it’s fortunate for all of us that the option of filing for bankruptcy exists. There is life after filing for bankruptcy and hope for people who are on the rebuilding side of bankruptcy.
If you’re now thinking of buying a home after bankruptcy, you may be wondering how it would work. Typically in order to get the best rates available in the marketplace, lenders are looking to see that a home buyer or homeowner has had two solid years after being discharged without defaults and one combined year of rebuilding credit. That’s a total of just two years after filing that the Canadian Mortgage and Housing Corporation (CMHC) or Genworth will look at approving a high-ratio mortgage, which includes a down payment of 20% or less.
As with any credit application, your credit score will factor into the decision, but with post-bankruptcy applications, the criteria are slightly more complex. One of the things that are looked at is the source of the current down payment. Money that has been earned, accumulated, and saved then will be used for a down payment is most valuable because it shows that the applicant has the ability to budget effectively and achieve financial goals. Gifted money, on the other hand, is not valued as highly. In the case of gifts, the bank is relying heavily on the source’s ability and willingness to continue to support the applicant if his or her financial situation does not improve.
Other factors considered can include job stability, the length of time since the bankruptcy, and the reason(s) that the applicant filed for bankruptcy protection in the first place.
The first step in applying for a mortgage after bankruptcy should be to find out just what kinds of hurdles you’re up against, and if all of them are even correct. Frequently credit reports contain errors that can be damaging to people’s histories and cost them significant amounts of money through increased interest rates. To obtain your free report, contact Equifax or Transunion.
The free reports, while useful, will not contain your credit score but will contain notes about your history. Sometimes issues that were settled before or during bankruptcy with creditors are neglected to be removed from the record afterwards. Ensuring that the credit report is accurate and does not contain any unnecessary notes against you can significantly increase your overall credit score.
The next step is to get in touch with an experienced Mortgage Professional who can put you in touch with a wide variety of options including both traditional and non-traditional lenders.
A SIDE (Based on qualifying terms)
5 Year -
Variable Rate Prime - .10% = 1.75%
Fixed High Ratio - 1.89%
Fixed Conventional - 2.09%
B SIDE (Bad credit/Low income)
1 Year or 2 Year Fixed - 2.99%
First Mortgage - 5.49%
Second Mortgage - 6.99%
Third Mortgage - 10.99%
All rates are subject to change without notice. Rates and Terms must meet qualifications for each program.