Everyone deserves a second chance, and we often hear from people who have restructured their debts and now want to buy their own home. Is this realistic, and if yes, how soon is it possible?
A lady wrote this week and said “my husband has been in a consumer proposal for a year now and I am in debt consolidation for 7 months. We are interested in purchasing a condo worth $350,000. Right now we are renting a 2 bedroom apartment for $1,200.00.
Will there be a chance for us to be able to get a mortgage? We do not have a down-payment but we want to give the builder a thousand dollars every month until the building is finished by 2016. How are our chances?”
I wrote back and said ” There will be another chance for you to qualify for a mortgage, but your husband’s proposal will have to be settled first. I don’t know what the terms of your own consolidation are – does not sound like a consumer proposal, but let’s assume that must be dealt with too.”
You will see there does not seem to be enough money to pay off their debts AND save for a new home at the same time. It makes sense to pay off the debt relief programs as quick as they can, and once that is done, begin saving for a condo. At least in the meantime their monthly rent is not too bad at $1,200.
It’s also very important they both rebuild their credit histories while they are paying off the debt otherwise they won’t get a mortgage even if they are debt free.
Regular readers will know I always proclaim that a mortgage is possible after a consumer proposal, bankruptcy, or other credit report mishap, but it won’t happen by magic. Here are the most important things to know:
- Your proposal, bankruptcy, or debt settlement plan should already be completed
- You should have a down-payment saved up – 20% is usually the minimum requirement – could be more or less depending on your unique circumstances
- You should have a credit rebuilding strategy well in place
- You still need to demonstrate your capacity to earn an income and make the mortgage payments comfortably
In most cases, it’s a good idea if you speak with someone like us first – to assess your personal circumstances and develop a timetable and strategy for you to become a home owner. It won’t happen overnight, but it can and will happen if you have a solid plan of action.
Related Article : Rebuild your credit after a bankruptcy
Related Article : Rebuild your credit while in a consumer proposal