What does it take to get a mortgage once you have claimed bankruptcy (BK), performed a proposal, or simply have bad debts on your bureau?
Let’s quickly review all 3 scenarios
Bankruptcy
Most Triple-A Lenders and mortgages requiring Default Insurance require 2 years of discharged, 2 years of re-established credit and a 2 thousand-dollar minimum credit card limit. If you require a mortgage before this 2-year mark (eg. One day after your discharge), you will need 20% down and most likely will require an Alt-A Lender or a B Lender.
- 2 years of discharge means you must get discharged first. This is a paper form that you get and is considered a certificate of discharge.
- 2 years of re-established credit means you need to get approved as soon as you are discharged. This will report to the bureau and begin your 2-year time frame.
- 2 thousand dollar limit must be on a credit card that is with a bank. Whichever bank you deal with ask for a secured credit card. If you cannot obtain this, you will need to start with a retail credit card – I suggest Canadian Tire Mastercard. The points rock.
Proposal
The BK Rule above applies the same to a proposal. You must be discharged for 2 years, re-established credit for 2 years, and have a 2 thousand dollar limit credit card. This rule applies to Triple-A lending only.
- Proposals don’t have as much scrutiny with Lenders, as proposals don’t involve real assets.
- Generally, proposals are treated the same as bankruptcy, but approval after discharge can be easier with a proposal.
Bad Debts
For any lender to grant you access to your equity, bad debts, judgements, and derogatory debts must be paid in full. With a private lender, you can avoid this, but the mortgage rate is very high. To reduce or settle these bad debts before entering a mortgage transaction, you can speak to a debt negotiator, or complete #1 or #2 from the above list.
Always talk to a licensed Mortgage Suite Mortgage Broker/Agent before entering into bankruptcy if you own your home or want to purchase one. We can direct you to the proper path and make sure you get the Mortgage that’s right for you.
