Mortgage Blog
Qualification for mortgage after you bankrupt or consumer proposal
June 11, 2024 | Posted by: Sarabjit Dhuna
You might think after you declared bankruptcy or consumer proposal you are never able to buy house however, this is wrong information many people believe. You may be able to qualify for mortgage or home refinance much sooner than you might think.
When you are able to buy property again?
As soon as you are out from Bankruptcy or whenever you pay off consumer proposal you are able to buy home. Many private lenders or alternative lenders can lend you money after you discharged from bankruptcy or you pay off consumer proposal. However, it might come with higher interest rates.
There are few lenders who can lend money while you are in bankruptcy or consumer proposal however, interest rate would be much higher, and we don't recommend this option while you are in bankruptcy.
If you have a down payment of 20% and you are out of bankruptcy or paid out consumer proposal, you might qualify for mortgage from alternative or B type lender to buy home immediately depending on your income and other factors.
If you are looking for a mortgage from a traditional or A type lender then you must work on your credit score for 2 to 3 years and improve your credit score greatly. You also need to check for any errors in your credit reports. In addition, you need to call the credit bureau if you find any error in credit reports.
Refinance during Bankruptcy
You are able to refinance during bankruptcy without any problem. It depends on your lender though. When you have less than 70 to 75% LTV then you are eligible for refinance or get second mortgage (HELOC) to pay out consumer proposal and any bankruptcy debts.
Benefits of Paying out Consumer proposal or Bankruptcy debts
There are a few reasons for the benefits of paying out consumer proposal as soon as possible.
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Renew existing mortgage: - If you have any mortgage or loan like car loan or credit card with lender then there are bigger chances that lender will not renew because of Bankruptcy or consumer proposal in your credit report.
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Qualify for New Credit: - Its really difficult for you to qualify for new credit during bankruptcy or consumer proposal period. The quickest way to qualify for credit is to pay out any types of debts like consumer proposal, bankruptcy and credit card debts. The consumer proposal can be removed only 3 years after the date you paid it. It will be removed from your credit file 6 years after the date you have filed it.
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If you want to rebuild, improve and getting new credit, then you have to pay out bankruptcy or consumer debts as soon as possible and from that moment make sure never miss payment and up to date with payment.
