Bankruptcy No longer means No Mortgage

In the past, traditional mortgage lenders have automatically rejected people who had declared personal bankruptcy. Many potential home buyers felt they must wait at least seven to 10 years after a bankruptcy to be eligible to become homeowners. This is a common misconception. While some people declaring bankruptcy have had trouble managing their money, a large number of those declaring have simply experienced unfortunate events. Canadians are filing bankruptcy art record high levels over the last five years.

Though a bankruptcy is certainly a blemish on a person’s credit report, it does not necessarily disqualify the borrower. Recognizing that some times bad things happen to good people, some selected loan officers are becoming more willing to take calculated risks.

Some lenders use a scoring system to determine whether potential buyers are a worthwhile risk. Unfortunately, bankruptcy gives an automatic low score. However, selected lenders are beginning to look beyond the scores and look at the individual in need.

Instead of waiting two or four years after being discharged from bankruptcy, some mortgage professionals are willing to give a home loan much sooner. Those who have declared bankruptcy may be eligible for a loan one year after discharge, and those who are still in consumer proposal may be eligible for a loan even while still recognizing.

Another common misconception is that a previous bankruptcy on your credit report will require you to have a large down payment and pay extremely high interest rates and points. There are currently programs available with as little as 5% down with very attractive interest rates and points. Some lenders are even pre-qualifying buyers for a loan saving time and making the home-buying experience easier and more efficient. When a buyer pre-qualifies, they will have the advantage of greater negotiating power.

No matter what the situation, select mortgage professionals have a program that will work for the buyer with a bankruptcy history. If a buyer cannot get approved, there are customized plans that can re-establish credit to help the buyer become mortgage-ready, ensuring home-ownership in the future.

Because of new options, bankruptcy no longer needs to stand in the way of getting a home loan. With the help of more creative lenders, those who have experienced financial difficulty will have an easier time getting a mortgage.