Declared bankruptcy 2 years ago. Will I ever be able to get a mortgage again?

When asking yourself this question it is important not to allow yourself to get too stressed out. There is a stigma to declaring bankruptcy, but you should keep in mind that there is no shame at all in your situation and you are certainly not alone. A lot of people declare bankruptcy as it the best possible solution to a very difficult and unavoidable situation. Now that you are thinking about how to buy a house after a bankruptcy, you must go about the process the right way in order to succeed. The most vital thing is not to be discouraged!

It is very possible to get a mortgage after declaring bankruptcy.

Anyone who has been through the process of buying a house after bankruptcy will tell you that the process is very different from the first time that they bought a home when they had no significant credit issues.

You will need to be ready to answer the following two questions:

  • Exactly how long has it been since your bankruptcy?
  • What does your credit look like now?

The answers to these questions will determine exactly what you must do next in order to successfully be approved for a mortgage after bankruptcy.

There are a three things that you must be able to do in order to qualify for a prime lender in these circumstances.

  1. It is vital that the down payment for the home come from your own pocket. Loans or gifts are not a good way to demonstrate financial recovery.
  2. 2 years is usually considered the amount of time after a bankruptcy you will have to wait before it is likely you will be approved for a loan. It is worth bearing in mind that every situation and lender is different. Some will require a longer period of time.
  3. Being able to demonstrate a solid history of re-established credit is a must and something that will definitely play into your favour.

Should you not qualify for the above there are alternatives to prime lenders.

Alternative lenders will be open to opening up a relationship with you almost immediately after the bankruptcy, with not established credit needed. There are a few stipulations that are needed to qualify for most alternative lenders.

  1. The down payment will often have to be considerably larger than when applying for a loan with a prime lender. For most homes in the Montreal area, this can be a sizable amount of money so it is best to be prepared.
  2. You will almost certainly need to pay a higher interest rate with an alternative lender, how much higher is determined by the current state of your credit profile.
  3. A full appraisal will probably be needed in order for the sale to be completed. This means that any agreement you engage in will need to allow time for the appraisal to be completed.

If you do go down the alternative route and are able to afford the payments, within a few years your credit should have recovered enough to move back to a prime lender and lower interest rates.

One of the first steps in discovering exactly what you need to do next is to talk to a mortgage professional. It is vital that you discuss your specific situation in detail to fully understand and appreciate the importance of the next steps. With proper planning and patients the bankruptcy from a couple of years ago need not hold you back from owning a home again.

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