Economy & Mood

Recently I encountered a stark reality in the mortgage business.  I reviewed in June 2011, the profile of a couple who came to me for a mortgage.  Their situation was quite financially weak, which made them unable to get a mortgage approval at that time.  There was a gifted downpayment, a serious past credit issue, and generally limited credit scores. 

I suggested that they wait at least a few months before buying.  This advice was based on the advice of the lenders and the insurers who make the ultimate decision if a person can qualify or not.  Again, they first came to me in June, and this September they returned.  What they didn’t know was that the industry has changed.

The lenders and insurers moods have changed due to the economy:  Greece is near bankruptcy and unemployment has not improved in North America.  Those same lenders who were encouraging in June changed their minds and became discouraging in September.  The emotional part for me is, I based my advice on June’s predictions, when I encouraged the couple their deal might work.  Guess who is the bad guy now?

 I feel for people whose deals fall through, but thankfully, that doesn’t happen very often.  However, the mortgage industry is forever changing, and seems to be changing more rapidly every day.  This is not a good thing for people with poor credit and weak finances.

Bankruptcy: Rules of the Game

Like all issues related to good or bad credit, credit activity remains on your credit bureau for 6 years with Equifax, and 7 years with Trans Union Credit Bureau.  

I am frequently asked the question, “Can I get a mortgage having gone bankrupt?”  The answer is yes, providing the following criteria are met.

Insurers like Canada Housing and Mortgage Corporation (CMHC) and G.E. require that you can qualify for a mortgage after completing a minimum of 2 years time following your discharge date.  Check your Certificate of Discharge papers for your date.  Also, you must have re-established credit.  This is not a car loan that you had before/during your bankruptcy.  “Re-established” means new credit.

Below are a couple of recommendations:

1. The longer you wait after the 2 year period, the better your chances of qualifying.

2. Having re-established credit with a Capital One secured credit card (or Home Trust Visa, etc.) with a $500.00 limit won’t cut it.  If you are able to get a secured credit card, try every 6 months to increase the limit, up to to $1000.00 or even $2000.00.  Just don’t use it too much and be sure to never have a late payment.

2. If you ever have a late payment while your bankruptcy information remains on the credit bureau, you are out of luck.

Next time I will discuss a few bankruptcy “horror stories” so you can avoid them in the future.  For more information on bankruptcy in Ontario, please click here.