Is Is Difficult To Get A Mortgage After Bankruptcy

by Jeff Anderson on January 21, 2012

If you have declared personal bankruptcy, financial establishments may still consider your application for a mortgage loan. However, your financial institution will require that you first start rebuilding your credit and then decide on your case. Mortgage brokers will also want to make sure you qualify before they approve an applicant with compromised credit.

The first step to make is to start saving money. This is necessary because you need to have enough money for the down payment. You can opt for a savings account, featured with a high interest rate, and deposit your savings there. How much you have to save depends on the property you want to buy. Set the right goals and be realistic about what you can afford. You may want to start with a small flat or house, working your way up. It will take you about 2 years to save for a property priced at $150,000 if you manage to save $100 a week.

Rebuilding credit is important, and you can obtain a secured credit card to this purpose. The credit limit of your credit card will be equal to the deposit you make. Secured credit cards show on your credit report in the same way as other credit cards. Here, it is important to pay your bills on time and avoid late payments on student loans, credit cards, and car loans (if you were extended any). Late payments will affect your credit score.

A friend or relative can cosign for you if you do not meet the loan requirements in Toronto, but make sure you can repay the loan. If you default, you risk putting a strain on your relationship.

Once your credit report has been updated, meaning that you have a credit card or loan that is reported to the credit bureaus, you may apply for a mortgage. Lenders are likely to offer you a better interest rate on a mortgage loan. This will not happen overnight but within 2 years after the bankruptcy discharge date, which is the time you need to save for a deposit. You can apply for a loan earlier than this, but the interest rate will be higher, costing you more in charges in the long run.

There are two main players to check with if you want to apply for a mortgage loan. These are brokers or mortgage arrangers and lenders or mortgage providers. If you are an existing client, it is recommended to apply directly with your financial institution. Brokers specialize in finding mortgage loans for their clients and have working relationships with many lenders. They will help you choose the right mortgage for your financial situation, assist with your mortgage application, and offer advice. A broker should work harder in your situation because most financial institutions will consider you a high-risk borrower. They may ask a higher fee for this reason.

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