Buying a House After Filing Bankruptcy or Consumer Proposal

Buying a House After Filing Bankruptcy or Consumer Proposal
Buying a House After Filing Bankruptcy or Consumer Proposal

Securing Homeownership Post-Bankruptcy or Consumer Proposal

Many harbor the misconception that declaring bankruptcy or filing a consumer proposal permanently dashes their dreams of owning a home. However, this is far from the truth. Securing homeownership post-bankruptcy or consumer proposal is absolutely achievable. It only requires clear planning, perseverance, and patience. This guide will help you navigate the path to homeownership after such financial setbacks.

Checking your Credit Report for Errors

After being discharged from bankruptcy or upon completion of your consumer proposal, the first step is to obtain your credit reports. The two major credit bureaus, Equifax and Trans Union, should be approached for these.

It’s critical to ensure that all details, particularly those related to debts included in your bankruptcy or consumer proposal, are accurately reported. If any discrepancies are found, they should be promptly rectified.

Time: The Healer

The second step might be the easiest yet the longest – waiting. To qualify for a mortgage, you must wait for a minimum of two years post-discharge from bankruptcy or the receipt of your Certificate of Full Performance if you filed a consumer proposal.

Rebuilding Credit

During this waiting period, it’s crucial to focus on rebuilding your credit. The Canada Mortgage and Housing Corporation, which insures most mortgages, stipulates a minimum credit score of 600 for mortgage qualification. However, most banks prefer a minimum score of 620.

Accumulating a Down Payment

The next hurdle is the accumulation of a down payment. A minimum of 5% down payment is generally required, but lenders may ask for up to 10% if you’ve been discharged for just two years. The down payment should ideally come from your savings or investments and not from borrowed or gifted funds.

Investing in Registered Retirement Savings Plans (RRSPs) and withdrawing them under the Canada Revenue Agency’s Home Buyers Plan might be a viable option.

Obtaining Mortgage Pre-Approval

Securing pre-approval for a mortgage should be your next step. A mortgage broker can present your case to multiple lenders, ensuring you get the best possible interest rate. They also have access to lenders with more lenient policies for post-bankruptcy or post-proposal mortgages.

Steps to Buy a House After Filing Bankruptcy or Consumer Proposal

Here’s a quick summary of the steps:

  1. Check your credit report for errors.
  2. Wait for at least two years post-discharge from bankruptcy or receipt of Certificate of Full Performance.
  3. Rebuild your credit.
  4. Save for a down payment.
  5. Obtain mortgage pre-approval.

Proactive Approach

If homeownership is a part of your post-bankruptcy goals, it’s beneficial to start discussing this with your trustee or insolvency counselor during your counselling sessions. They can guide you through the steps and help you steer clear of potential pitfalls.

Frequently Asked Questions

  1. Can I buy a house after filing bankruptcy or a consumer proposal? Yes, it’s definitely possible. It requires careful planning, patience, and a dedicated effort to rebuild your credit.
  2. How long do I have to wait before I can apply for a mortgage? You must wait for at least two years after being discharged from bankruptcy or after receiving your Certificate of Full Performance if you filed a consumer proposal.

Helpful Resources

Here are a few helpful resources to aid you in your journey towards homeownership:

Conclusion

Though challenging, buying a house after filing bankruptcy or a consumer proposal is a feasible goal. With patience, perseverance, and the right guidance, you can overcome financial setbacks and fulfill your dream of homeownership.

For any additional guidance or assistance, feel free to reach out to your financial advisor, insolvency counselor, or mortgage broker. Remember, the path to financial recovery and homeownership is not a sprint but a marathon. With the right steps and a positive mindset, you’re sure to cross the finish line.

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