With rising housing costs and tighter lending standards, many individuals are struggling to meet the necessary requirements for a conventional mortgage loan. For those who have gone through a consumer proposal to settle their debts, even obtaining a mortgage can be all but impossible. However, all hope is not lost - there are still options available to individuals who have recently completed a consumer proposal.
A consumer proposal is an agreement between an individual and their creditors that allows them to settle their debts while avoiding bankruptcy. Through this form of debt repayment, individuals can pay off a portion of their outstanding debts in a lump sum or in regular payments over a set period of time. During this period, creditors are legally required to cease any collection activities against the individual. While this type of arrangement can be beneficial in terms of debt repayment, it can also have an effect on one’s credit report and, consequently, their ability to secure a mortgage.
In order to qualify for a mortgage after completing a consumer proposal, a few things must be in place. Firstly, the consumer proposal must be fully executed and recorded in the public registry. Secondly, the individual must demonstrate their financial stability by establishing a good payment history with their creditors. This may include keeping up with payments in accordance with the consumer proposal and avoiding further debt. In addition, they should also have any and all collection accounts paid off in full. Finally, the individual will need to wait at least two years from when the consumer proposal was completed before applying for a mortgage.
Once these requirements have been met, there are still several steps involved in qualifying for a mortgage. A mortgage pre-approval is essential, as this will enable the individual to determine how much they are eligible to borrow. Lenders will also consider factors such as the individual’s credit score, income, debt ratio, employment status, and other factors when determining mortgage eligibility. Additionally, it is important that the individual provide evidence of their ability to make payments in accordance with the proposed payment terms.
Overall, obtaining a mortgage after a consumer proposal is not impossible, however, it is important to remember that it may not be easy. In addition to a lengthy approval process, additional fees and higher interest rates may be required in order for the individual to qualify. As such, it is essential that the individual take the time to understand the details of the mortgage process and seek out assistance from an experienced mortgage broker if needed.
In summary, qualifying for a mortgage after completing a consumer proposal is possible, though it is not guaranteed. The individual must first ensure that the proposal is fully recorded in the public registry, demonstrate their financial stability, and wait at least two years from when the proposal was completed. In addition, they will need to apply for a mortgage pre-approval, provide evidence of their ability to pay in accordance with payment terms, and be prepared for additional fees and higher interest rates. With the right combination of preparation and assistance, even those who have recently completed a consumer proposal can find the mortgage solution they’re looking for.
This article was contributed on Oct 23, 2023