Bankruptcy Does Affect A New Mortgage, But It’s Not A Lost Cause
Declaring bankruptcy may make you feel like you’ve lost all hope, but that isn’t true. Bankruptcy does happen, but there are steps you can take to minimize the effects of it to start anew. Thankfully, there is no waiting time one faces after being discharged from bankruptcy. This means that you can apply for a new mortgage at any time, but before you do, make sure you know what to do.
That’s why we’ve put together a guide for you to follow to be able to get a new mortgage:
Don’t Rush, Focus On Getting A Good Credit Score
Unfortunately, after declaring bankruptcy, your credit score will most likely be low. This often depends on how much time has passed. There is a rule of “two, two and two,” which means a person must be free of bankruptcy for two years and re-establish two credit lines the day they’re discharged.
Traditional mortgages often give the best rate, but you have to follow the rule of “two, two and two” to qualify. Having two credit lines that prove that you’ve been making the payments on time each time can get you approved. Even missing one, or making a late payment, will show up on your credit history and affect your chances of getting a new mortgage.
Stay Under 50% Of the Card’s Limit
As exciting as it may be to get the two lines of credit again, it’s important to use them properly. Working to re-establish your credit score means proving discipline and financial responsibility. Ensure you’re staying under 50% of the card’s limit to maintain this. Using the card once a month for an item, whether it’s $5 or $500, will help with good credit.
Make Sure To Get A Credit Report Copy
It’s important to get a copy of your credit report and review it carefully for any errors. Sometimes, creditors don’t remove the balance after your bankruptcy discharge, which leaves mistakes on the report. The credit report can show that you owe money, which you legally no longer do. That is why you must check it over prior to getting a new mortgage. Once you feel that your credit score is higher, often over 680, you can consider applying for a pre-qualified loan. This may take time, but can ultimately make the process of getting a new mortgage easier in the long run.
Our team at Collin Bruce can help the process of getting a new mortgage easier by locking in interest rates for 120 days. This will give you time to browse for your new home, while your locked-in rates drop and if they get raised, your interest rate stays the same. We ensure you the best rate with our pre-approval process.
Our Edmonton Mortgage company gained a reputation as Canada’s #1 Broker for Mortgages Funded for a reason. You deserve a fresh start after a financial bump in the road, so call us to book an appointment today!