A consumer proposal may have put a hold on your financial goals, but it is still possible to get a mortgage and own your dream home.

While there might be additional hurdles, or you might have to wait a little longer, you can work on a plan to go after your dream home in a financially responsible way.

Getting a Mortgage after a Consumer Proposal

Mortgage lenders typically check your credit score to see a history of your ability to make payments on time and in full. If you have shown a history of making payments on time and in full to other lenders, they will assume that you will also make your mortgage payments on time. However, lenders will consider you a credit risk if you have a consumer proposal on your credit report.

One of the drawbacks of a consumer proposal is it remains on your credit report for at least three years in Canada.

Potential lenders will know that you have gone through a proposal when reviewing your credit report.

How long after the proposal can you get a mortgage?

Typically it takes at least two years of a clean credit history to get a mortgage from a bank or traditional lender.

If you have recently entered into a consumer proposal or completed one, lenders consider you a credit risk based on your credit report. It takes time to build your credit score, and it is unlikely that lenders will finance a mortgage until you have at least two years of proven credit after the end of a consumer proposal.

Qualifying for a mortgage after a consumer proposal

If you dream of owning your home, making sure that you are rebuilding your credit score and your financial foundation is the best way to make sure that you qualify for a mortgage when you want it.

After completing your consumer proposal, it is essential to continue to build good habits so that you can secure your financial future.

While your finances will not improve overnight, small changes over time can add up and help you secure your dream home.

Focusing on rebuilding your credit score after a consumer proposal and saving for your future down payment are two things you can work on to qualify for a mortgage.

Rebuild your credit score.

Your credit score is a significant element in your mortgage application and can impact a lender’s decision to give you a mortgage. Even if you do not qualify for a mortgage right after a proposal, intentionally making an effort to rebuild your credit score will help you get a mortgage in the future.

Here are some tips to help you rebuild your credit score.

Slowly start to use credit.

When you start to use available credit responsibly, it can help positively impact your credit score. Lenders can see that you can be trusted with credit and will pay it back on time and in full.

Pay bills on time. 

On-time payments on time are among the most significant factors that affect your credit score. If you consistently make payments on time and in full, you will improve your credit score and prove to future lenders that you will make payments on their loans on time.

Review your credit report 

After a consumer proposal, people find errors in their credit reports in many cases. For example, creditors might continue to report balances as past due when the debt was part of a proposal. It is essential to continue to check your credit report and correct any errors to help you rebuild your credit quickly.

Save for Down Payment

Typically in Canada, you need a 20% down payment for a home to avoid the cost of mortgage insurance. In some cases, lenders might charge a higher interest rate when you have a smaller down payment.

After a consumer proposal, it is not only a good time to rebuild your credit but also to save and secure a down payment on your future home. If you are looking to qualify for a mortgage, a larger down payment can help keep your debt in check.

Consider Alternative Lenders

Generally, after a consumer proposal, the bigger banks and traditional lenders in Canada consider you a credit risk. You will have to prove that you can make payments on time and in full over time.

In the meantime, you might consider alternative lenders or B-lenders, who might be more flexible with their requirements. However, it is vital to consider a mortgage through such lenders carefully. Alternative lenders typically charge higher interest rates and may offer shorter loan terms and additional fees.

While alternative lenders might give you a mortgage when you need it, it is crucial to consider your financial habits and situation. If you are stretching your finances to be able to afford a mortgage, you might find yourself with unmanageable debt again, same as before your consumer proposal.

Mortgage and Consumer Proposal

If you’re looking to qualify for a mortgage for your dream home after a consumer proposal, know that it is possible. While there might be additional hurdles, or you might have to wait a little longer, it is also an excellent time to build your credit and save for a future down payment. Being patient and diligent in this process can help you secure a solid foundation for your financial future.

If you are thinking about a consumer proposal or are rebuilding your financial life after a consumer proposal, our team of experts are here to help. Call us for a free consultation.