If you’ve been unfortunate enough to go through a bankruptcy or consumer proposal, and need to apply for a mortgage loan to purchase a property, you’ll find that it might be a lot tougher than you anticipated.
Around 100,000 Canadians apply for bankruptcy or a consumer proposal every year, and this can be for any number of reasons, from the closure of a business to a divorce. The situation can be stressful and depressing enough, without then learning that applying for a mortgage is going to be problematic.
Fortunately, while the application process is more difficult and your eligibility will be scrutinized, there are some options available to you if you’ve been declared bankrupt and want to apply for a mortgage.
Can you apply for a traditional mortgage following bankruptcy?
If you’re in a position to purchase a new home and have a bankruptcy on your record, it’s still possible to find a good rate, and while a traditional mortgage may give you the best rate, you must be able to meet the following requirements:
- Have been discharged from bankruptcy for at least two years and one day
- Have established credit for 2 years of that duration
- Have the ability to put a 5% down payment on the property you wish to buy
While it may still be possible to obtain a mortgage if you’re within the two year discharge window, you will likely need a bigger down payment and might also be forced to pay a much higher rate of interest.
Working with a mortgage broker
The entire mortgage process following bankruptcy can be made so much simpler if you work with an experienced mortgage broker from the outset, as they can help you establish what you can truly afford, and help you find the best possible rates for that purchase.
Other tools to help you
Aside from seeking help from a local mortgage broker, there are a few other tools that you can take advantage of to help you, such as an online mortgage calculator, which can help you understand what you can afford. Seeking a mortgage pre-approval can also help you understand what you can realistically expect to be approved for, and your mortgage broker can help you with this.
Many reputable mortgage brokers offer free consultations, so if you’ve been declared bankrupt and are seeking to purchase a new home or any other property, you’ve got nothing to lose by getting professional advice and guidance from a mortgage broker.