Take comfort in the fact that your life is not over and you can still own a house. We are here to help over the long haul, and the best news yet is that institutions pay us.*
Re-established credit should be among the key phrases in your vocabulary after bankruptcy discharge. Apply for a secured credit card (see “Related” in the sidebar to the right). Institutions like to see 2 separate forms of credit responsibility to re-establish credit. Use the card once a month and pay the monthly statement in its entirety as soon as you get it. If you purchase immediately after discharge, the lender will require a minimum 25% downpayment, current income to show the ability to repay the debt, and may also ask for collateral in the form of a guarantor as security for the mortgage. Contact us if you need help.
Ideally, institutions prefer to see a minimum of 2 years of re-established credit history (payments) on your credit rating from the date of discharge. The sooner the re-establishing process begins the better. Remember, use the card(s) once a month and pay the statement as soon as you get it.
When are you ready to buy a home?
Contact us to formulate and strategize a plan through which we can realize your goal.
There are things to consider such as saving for a down payment and closing costs. The down payment is a percentage (%) of the purchase price or appraisal price generally speaking in the area of 10% or more. Discharged bankrupts are considered a greater risk (don’t take it personally) so do not expect to be able to buy with only 5% down.
When you’ve saved up enough for a down payment and closing costs, we must pre-qualify you for a mortgage loan.
Mortgage loan qualifying
Major lenders generally use the Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to calculate the amount of mortgage loan a buyer can handle. For the GDS, the annual mortgage payments (principal & interest), property taxes and heating costs must not exceed 32% of the family’s annual gross income. For the TDS, other consumer debts such as monthly credit card payments are added to the GDS, this total is not to exceed 40%. The percentages may vary slightly depending on lending institution.
A letter of employment will confirm your length of employment, type of work, and salary. Self-employed persons may have to provide three years’ financial statements and the Notice of Assessments from the Canada Customs & Revenue Agency. This is to confirm claimed income and that there are no personal income taxes owed. If there are any personal taxes owed they will have to be paid in their entirety prior to mortgage loan approval.
If you can’t get a mortgage loan on the merits as an applicant/co-applicant alone, it may be granted if a financially-secure family member co-signs as a guarantor. This individual would then be responsible for repayment of the loan if you failed to make the payments when due. Contact us when you are ready.
Need over 75% mortgage financing?
Generally speaking CMHC approval is required, and approved borrowers have to pay a CMHC insurance premium (a one time fee), which is generally added to the loan. CMHC protects the financial institution (mortgagee), not the borrower (mortgagor). There are alternative lenders who do not require 3rd party insurance. Contact us for a distinct breakdown of the options available to best suit you and your goals.
Any financial institution that lends mortgage financing over 75% as a first mortgage will charge a fee based as a percentage of the mortgage amount. Contact us for a breakdown as the percentage (%) rates may vary over time.
If all or part of your 10% down payment is from a financial gift, the funds may have to be in your possession (proof may be required) prior to mortgage financing. CMHC is a federal agency providing mortgage default insurance. GE Canada is a private insurer providing mortgage default insurance.
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* Conditions apply.