Qualifying for a Mortgage

October 29, 2020

Even people filing for bankruptcy are interested in qualifying for a mortgage.  With mortgage rates at historical low rates, and for a protracted period of time, buying a house is often cheaper than renting, even at inflated real estate prices.  

Bankrupts who own property at the time they file for bankruptcy do not need to forfeit their homes.  The trustee will rarely force a sale.  If there is equity in the property, the trustee will usually remedy that by making payments arrangements with the bankrupt allowing them to keep the property.

Bankrupts can claim an exemption, the value is based on provincial jurisdiction, and the courts have ruled they are entitled to claim their exemption before the creditors (except those secured on the property) receive any money. -During a bankruptcy, few bankrupts have any difficulty renegotiating their existing mortgages when they become due.  However, they would, usually, have challenges adding new money to an existing mortgage.

We have spoken to several mortgage brokers and they all seem to have similar criteria when thinking about writing new mortgages for people who have been bankrupt.  First, they don’t want to see that the bankrupt person used the process to walk away from a mortgage (allowing a power of sale) – so it may be best to sell the property and pay out the mortgages, including penalties, before filing.  Then they like to see stable employment, usually for at least two years, it is helpful to have two, current, bank issued credit products on a credit report and they like you to have been discharged for at least two years.  Obviously, you will need a down payment, the bigger the better, and co-signers may also be required.

If you need more information about your prospective bankruptcy or proposal will impact you just call the office at 519-646-2222