REBUILD YOUR CREDIT AFTER BANKRUPTCY

Establishing Yourself After Bankruptcy!

January, 2010.

We thank Matt Weiler of ShopMyMortgage.ca for providing these step by step procedures. If you follow these steps you will be able to qualify for the most difficult credit of all; a mortgage. Forms are provided for cleaning your credit and it's all free.

Step 1 - Get Your Absolute Discharge
You need to ensure the lenders that you are now "clear" from the financial issues you were facing. You need to gain your Absolute Discharge first before proceeding to do anything else first.
Read More About Step #1
Step 2 - Clean Up Your Credit
Now that you are discharged fully, you will need to ensure that your credit score is reporting accurately. There are common mistakes that happen after being discharged, read more on how to prevent these issues from happening to you.
Read More About Step #2
Step 3 - Gain New Credit
Now that your score is fixed and the past is behind you, you need to start rebuilding for the future. You need to prove yourself with new credit and gain a level of trustworthiness again. Read more to learn about what is good credit, and how to get Re-Established Credit working for you.
Read More About Step #3
Step 4 - Accumulate Your Down Payment
Now that your credit is on it's way to being Re-Established, you will need to accumulate a down payment. Today's minimum down payment level is 5% as a down payment. Learn about the key word of "capacity" which is the big buzz word lenders are looking for today.
Read More About Step #4
Step 5 - Get A Pre Approval
You have your credit score in place, you have a down payment just sitting and waiting in your account, so long as you are 2 years discharged with 1 year of reestablished credit you can now gain an interest rate guarantee before you go house shopping.
Read More About Step #5
Step 6 - Purchase Your Home
You've worked hard to get here! Now is the time to place an offer on a home so that you can have ownership once again. Read about the strategy of using the best lenders and getting the best rates which will help you succeed in the long run.
Read More About Step #6

Gaining A Mortgage After Bankruptcy

March 26, 2009

By Matt Wieler, Accredited Mortgage Professional
ShopMyMortgage.ca

Gaining a mortgage after bankruptcy in Canada has changed a lot, especially over the last 2 years. There is still some information floating out there about different lenders and their risk potential, and how you can gain a mortgage 1 day after being discharged. Most of these programs don’t exist anymore, and if it does still exist the horrible interest rates in the 20% range should scare you away. I’d like to spell out an easy to understand system for people on how after bankruptcy lending in Canada can work best for you today. It is still surprisingly easy and very inexpensive to gain a mortgage after bankruptcy, so long as you understand and follow the 1 simple guideline below:

Two years discharged from Bankruptcy with 1 Year of Re-Established Credit. This timeline is what all people should be shooting for and by far is the best, most profitable way to gain a mortgage after bankruptcy.

Two years discharged from Bankruptcy with 1 Year of Re-Established Credit.

This timeline is what all people should be shooting for and by far is the best, most profitable way to gain a mortgage after bankruptcy for consumers. At this stage, if you have exactly that statement attached to your financial circumstances, you should be able to gain a mortgage AT THE SAME INTEREST RATE a bank or Credit Union would give to their best A+ customer. Sounds crazy, but it is 100% true.

How can the Lowest Interest Rates be Available to Me?

The reason why the best or lowest interest rates are possible even after bankruptcy is because CMHC (Canadian Mortgage and Housing Corporation) who insures the banks and credit unions, would be willing to insure your mortgage with the bank or credit union, just like CMHC does with First Time Home Buyers and other consumers not placing 20% as a down payment. CMHC is a government company that is a insurance protection policy to pay the bank out any money if in the event the bank was to lose money on any particular mortgage. Once your mortgage is insured by CMHC, your lender does not have any more risk. They are guaranteed their profit by CMHC, and therefore can offer the best rate possible for that mortgage just as they can do with all other consumers.

What is “Re-Established Credit”?

DON’T MISS A PAYMENT!
Just 1 missed payment or collection on your credit score after a bankruptcy could completely wreck your chances of gaining a mortgage for the next 6 years after being discharged.

Being 2 years discharged is not difficult to understand, and normally doesn’t trip people up, but understanding Re-Established Credit is your key to success. CMHC does have a few definitions, but I want to describe to you what will make your life easier on you. Re-Established credit is 12 months of a NEWLY reporting credit line of $1,000 or more which is obtained or opened AFTER your discharge date. If you had kept your car, and car payment through the bankruptcy, this does not qualify as Re-Established Credit, it has to be NEW credit. There are variations to these rules and each situation can be different per application, however, it’s best to talk with a professional about alternative options. No Question, gaining their Re-Established Credit is the 1 factor that trips people up today. Just gaining a secured credit card isn’t the only thing to do, you must remember what’s important is:

DON’T MISS A PAYMENT!
Just 1 missed payment or collection on your credit score after a bankruptcy could completely wreck your chances of gaining a mortgage for the next 6 years after being discharged. It is very important to make your payments on time.
Use Your New Credit Wisely:
Making your payment on time is only half of the Re-Establishment. Keeping the balance on your card to never exceed 50% of your credit limit is also very critical. If you were to max out your card and pay it off at the end of the month, and then max out your card and pay it off month after month, you will gain a horrible credit score. This is because your percentage of available credit is always at 0% every month. Rather, try to never exceed 50% of your limit, and your score will rise quickly because every month you have at least 50% available credit. This strategy works on a $10,000 line of credit or even a $200 Secured Mastercard! Get that score up there!

BEWARE - WARNING – LOOK OUT:

Two things I normally warn people about…. especially when they are going for financing after bankruptcy:

Save Yourself Headache & Frustrations – Consider Using a Mortgage Broker.
Not all banks and credit unions use CMHC’s policy for 2 years discharged 1 year re-established credit even though most of them can do CMHC insured mortgages. Each bank or credit union makes up their “own” internal rules, and will not tell you the consumer what their rules are. Some lenders state that they will wait the full 7 years, other state they will do 4 years and do 2 years re-established. A Mortgage Broker will know all the in’s and out’s of which lender has which policy after bankruptcy, and will be able to walk you through it with ease instead of you going to a lender that has a 7 year policy. Plus a Mortgage Broker is ALWAYS free, they get paid by the lending institution that gain your mortgage from, so seeking free professional advice is worth it. And just as a quick plug, not all Mortgage Brokers know all the same information either or have the same amount of experience in a field. If you choose to work with a Mortgage Broker like myself that specialized in a particular field such as after bankruptcy lending would be wise to seek out as well. You need to be able to gain good helpful information to make an educated decision.
Be Rate Sensitive – You Deserve a Good Rate.

No matter who you decide to use to gain your mortgage through, PLEASE do look around to ensure that your rate you’re being offered seems reasonable. You DO qualify for lowest rates, and normally what I’ve seen happening is people just accepting the highest rate a bank can throw at them, and the people just think “Whoa, we can buy a house! Let’s do it!”, and with the excitement and hope that life will be great again, they accept this rate without thinking about whether it is reasonable or not.

If you have any questions about this article, either gaining a mortgage, getting re-established credit, or something is confusing you that you need more information on, I would be happy to answer all your questions free of charge by contacting me through my “Just Ask Us” page on my website! I can make it happen for you!

Thanks for Reading.

Matt Wieler, AMP

September 26, 2007

by Donna Ryan, Mortgage Representative
Centum Financial

Understanding mortgage financing is tricky at the best of times and certainly becomes more difficult after you have declared bankruptcy. The best way to navigate through the minefield is to understand how mortgage lenders think and what they look for. All institutions that lend money are primarily worried about one thing… risk… and will they be paid back the money. In their eyes a person who has been previously bankrupt poses a higher risk than a person who has not. This does not mean that you cannot obtain a mortgage after bankruptcy, but there are some things that need to be done and some pitfalls you should not fall into.

due to the current mortgage situation in the U.S., most lenders have become nervous and will only consider financing after you have been discharged for 6 months.

There were some lenders who would consider mortgage financing 1 day after discharge, but due to the current mortgage situation in the U.S., most lenders have become nervous and will only consider financing after you have been discharged for 6 months.

Equifax and Transunion credit bureau reports are of great importance to a lender and that is one of the first things they look at. What is your credit score and what does your past credit history look like? A bankruptcy will stay on your credit bureau for 7 years. A second bankruptcy will trigger the 1st one to show on your Transunion credit bureau even though the first bankruptcy was over 7 years old. Lenders will not consider mortgage financing if a double bankruptcy situation shows on the credit bureau report. In the case of a double bankruptcy, the most recent one would have to be over 7 years old for a lender to agree to financing.

After discharge from bankruptcy you should check your credit bureau report to ensure that all items included in the bankruptcy show this way on your report. Some institutions do not report correctly and this can give you an artificially low score and could potentially prevent you from obtaining credit of any kind or paying a higher interest rate than you need to. A copy of your credit bureau report can be acquired for free from Equifax. If there are some errors, you can show your bankruptcy papers to Equifax and they will make the corrections for you. Once this is done it usually takes about 3 months for your score to improve.

It is vital that you never make a late payment after the bankruptcy.

Some credit needs to be established after bankruptcy. This can be accomplished by obtaining a secured visa, an auto lease, an auto loan.. etc. Most lenders like to see two credit items that have been reporting for 6 – 12 months. It is vital that you never make a late payment after the bankruptcy.

If it is at all possible, it can be beneficial to carry some credit through the bankruptcy. As long as the payments are made on time, all the time, this can help to improve your credit score and is a positive in the eyes of the lenders.

We see a situation quite often with couples where only one has some credit showing on their bureau report, for example, a car lease. An easy way to establish credit for the other is to make the lease joint. This will start reporting on both credit bureau reports without having to increase the amount of credit.

In order to be considered for mortgage financing 6 months after discharge some credit will have to be re-established or existing, and reporting (with no late payments) for 6 – 12 months. Also a minimum down payment of 10 – 25% will be required. Once you have been discharged for a year with re-established credit, the down payment may only be 5 – 10%. Two years past the discharge and it is possible to obtain 100% financing or no down payment as long as re-established credit exists, again with no late payments.

If you have had a mortgage foreclosure included in your bankruptcy and this shows on your credit bureau report, you will have to wait 7 years for this to disappear from the report. The other trouble area is student loans. You cannot include a student loan in a bankruptcy. If a student loan goes to collection, a lender will want the collection paid in full prior to agreeing to financing. This would obviously be a very difficult thing for most people to do. It is therefore important to maintain student loan payments.

There is the possibility of getting a mortgage after you have been discharged from bankruptcy, but the best way to get to that goal is to think like a mortgage lender and understand what to do and probably more important… what not to do.

Rebuilding Your Credit after Bankruptcy

Gaining A Mortgage After Bankruptcy

The Minefield of Mortgage Financing After Bankruptcy

Overview:

Bankruptcy Information: