When it comes to finances, bad things happen to good people. Unfortunately bankruptcy is one of those decisions that put you in a bind for the short run, but it’s a decision that is sometimes the only way to a better future. You may start to worry about how bankruptcy will affect the future purchase of a home but obtaining a mortgage after bankruptcy is not impossible. Getting approved for a mortgage after bankruptcy discharge may have been a bit easier a few years ago before the guidelines were altered, however even today, with the right attention to detail and strategy for credit recovery it is possible. To obtain a mortgage after bankruptcy, it is important to familiarize yourself with the following details:
– Most lending institutions, including major banks, will not consider an application sooner than 2 years after discharge with proof of re-established credit. There are some lenders that may consider an applicant less than 2 years since discharge; however it is dependent on the overall application including spending habits, savings, employment, current credit score and current credit report. That being said, having a broker locate the right lender is key!
– The type of property and size of down payment will also be taken into consideration. The lenders may not want to approve a mortgage on a property that they feel is not as marketable as other (stack townhouses, apartment condos and high rise condos). It is important that a sufficient down payment has been saved. Typically, to obtain a mortgage after bankruptcy, the down payment criteria can be anywhere from 10-20% depending on the lender and current credit situation.
– When considering a mortgage after bankruptcy, it is crucial to put emphasis on re-establishing your credit. Credit is crucial in determining the interest rate that you will be quoted. It is typical, as a past bankruptcy client, to be quoted a higher interest rate. However, if all criteria is met (credit score, credit activity, down payment, discharge, good debt servicing ratios) the likelihood of getting a better rate is much higher.
Hopefully this eases to stress of wondering whether or not you can get an approval for a mortgage after bankruptcy. It is very important to remember that whatever happens from day one of entering a bankruptcy to 2 years after discharging it can affect your chances so it is imperative to make sure payments are consistently on time. To help with this, it may be smart to set up automatic payments and overdraft protection. If you are interested in applying for a mortgage after bankruptcy, we can help guide you in the right direction. With post-bankruptcy applicants, it is extremely helpful to have a reputable brokerage like CMS represent you. We deal with over 20 lenders (banks, alternative and private) that have a large variety of mortgage products that fit appropriately around your current financial situation. After discharging your bankruptcy, we can assist in arranging financing with the best rate you qualify for by positioning your application in the most appealing way and negotiating on your behalf.