Bankruptcy challenges are daunting. But it doesn’t mean you’ll never get a mortgage again. In fact, if your loan to value is low (a bigger down payment) and your income is stable with good job tenure, you are well on your way to mortgage success Here are the 6 crucial steps you should take to Mortgage Approval:
- Get Official Discharge—Quickly!
Start by finding a good bankruptcy trustee. Contact your local BBB or Chamber of Commerce to find out recommendations. A good trustee can help you find the best plan for a complete discharge in the shortest time possible.
- Review Your Most Recent Credit Score
Pull both Credit Bureaus-Equifax & Transuion Canada Reports for your credit. Make sure there are no surprises and that the debts included in your bankruptcy have been paid off. As a guideline, you should get a copy of your credit report yearly. If there is a mistake, make sure it is corrected by disputing or contacting the Bureau.
- Re-establish your Credit
A mortgage is much easier to get with good credit. You want to start rebuilding your credit as soon as possible. The first step to do this is to get 2 trade lines (credit cards) as soon as you can. You can reach out to Capital One, Home Trust, Peoples Trust & Secured Credit with as little as $500 down. Follow the 2-2-2 rule that says, two lines of credit, with at least a max limit of $2000 for 2 years. With that said, Pay your bills on time, even minimum payments! Late payments can make a very negative impact on your credit.
- Pay any Outstanding Taxes to Revenue Canada
Make sure your taxes to Revenue Canada are paid up! This is the most important aspect of getting a mortgage. If you don’t pay, then no mortgage!
5. Start Saving your Money!
Start saving for a down payment. You could need as much as 10% down or as little as 5% down. It depends on your situation (history, credit score, etc). To start saving some extra money this site has some great options! to learn some amazing ways to save money. Every little bit helps!
6. Put Budgeted Savings into an RRSP for Down Payment
If you are a first time home buyer in Canada you can borrow up to $25,000 from your RRSPs. Use those funds as a down payment on your new home. Since contributions to an RRSP generate a larger tax refund you can use your tax refund to grow your savings even faster! Using the government’s money is a smart way to save up a down payment. *NOTE: For every $1,000 dollar contribution you will receive up to $400 back!
Finally, make sure you keep all of your Bankruptcy papers. Even though your bankruptcy has been discharged, the lender which you are applying for mortgage with may ask you to provide a copy of the statement of discharge along with copies of the bankruptcy papers showing all the creditors accounts and balances included in your bankruptcy.