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Like most people, you're probably wondering what happens when you have a Consumer Proposal and whether you can still qualify for a mortgage. After all, someone must have gone through a similar situation like yours when life throws curveballs at us unexpectedly.
The answer may surprise you, but having a Consumer Proposal is a positive indicator that you are taking your financial situation seriously and doesn't inhibit you from qualifying for a mortgage. However, a Consumer Proposal can significantly impact your financial situation and credit score. So it's essential to ensure your debt burden is affordable before making any more mortgage debts.
This blog post will outline everything you need about Consumer Proposal and mortgage refinancing. And if you need extra financial help, don't hesitate to reach out to one of our mortgage brokers in Richmond Hill!
What Is a Consumer Proposal?
A Consumer Proposal is a debt repayment plan legally binding between the creditor and the borrowers. This plan is administered by a Licensed Insolvency Trustee (LIT) and developed with the borrower to propose a repayment plan that works with both parties. This proposal can be advantageous for borrowers, resulting in a lower outstanding debt, an affordable repayment plan, and a stop-gap to an otherwise perpetually growing debt burden.
However, having a Consumer Proposal does not prohibit someone from qualifying for a mortgage loan. In this blog post, we will outline the process of qualifying for a mortgage when you have a Consumer Proposal so that you can better understand what is involved in getting one approved.
What Will Happen to My Mortgage if I File a Consumer Proposal
In case you didn't know, a Consumer Proposal is a legal document that debtors can use to negotiate with their creditors. A Licensed Insolvency Trustee must administer the proposal on behalf of the debtor.
When filing the proposal, debtors can keep their mortgages unchanged. However, if the creditor declines the proposal, the Insolvency Trustee might consider changes to the mortgage terms to ensure the overall debt burden is affordable. This includes lowering the monthly payments, extending the loan term, or refinancing the debt.
Keep in mind that any changes to the mortgage will be subject to lender approval, so wait to get your hopes up until you hear back from your lender. In the meantime, continue making payments on your mortgage as usual.
How Does a Consumer Proposal Affect My Credit Report?
Getting a mortgage while you have a Consumer Proposal is possible. A Consumer Proposal is a legally binding agreement for the debtor to pay off their outstanding loan in a specified duration and amount. This document helps improve the credit score over time and will be reflected on the borrower's credit report until after the Consumer Proposal is paid and discharged.
Having a Consumer Proposal helps put a stop-gap to a declining credit score. And any debt payments to bring down the outstanding debt will only help to improve the credit score over time. Therefore do not hesitate on the benefits of a Consumer Proposal on your credit score and credit report. For more information, you should contact your local Licensed Insolvency Trustee.
Will a Consumer Proposal Impact My Ability to Get a New Mortgage?
If you're looking to purchase a home or refinance it but are worried that having a Consumer Proposal will harm your chances of getting it approved, consider speaking with a licensed mortgage broker to get the answers. Having a Consumer Proposal benefits your ability to qualify for a mortgage loan.
A Consumer Proposal helps to establish your debt-to-income ratio and prove to the mortgage lender that you are serious about turning your financial situation around for the better.
The mortgage broker and underwriter will include the Consumer Proposal in their calculation to determine your household's debt-to-income ratio. This ratio will help lenders decide if they will approve your mortgage loan.
Getting declined by a bank because of your Consumer Proposal is not the end of the road. There are alternative lenders with flexible lending guidelines who would qualify your application while you are on a Consumer Proposal.
If you're interested in purchasing a home or mortgage refinancing but have yet to find one that works for your financial situation, consider working with a mortgage broker who will reach out to multiple alternative lenders on your behalf. Contacting a mortgage broker can often result in you finding alternative solutions that conventional lenders would not be able to offer you. So, feel free to contact your local mortgage broker for help. You may be surprised by the outcome!
Can You Get a Mortgage During a Consumer Proposal?
So you're considering getting your first mortgage, but you're still determining if you can get one while in a Consumer Proposal. The good news is that you can!
Most lenders will consider you during a Consumer Proposal if you can provide documentation that your debt-to-income ratio is within acceptable limits and you consistently make regular payments according to the Consumer Proposal. Also, lenders may consider your credit score, debt-to-income ratio, and overall net worth based on assets. So if you've been thinking about buying a new home, do not hesitate to go ahead and do it.
Get pre-approved for a mortgage to lock in a great rate and be ready for the approval process!
Can You Get a Mortgage After a Consumer Proposal?
You can get a mortgage after discharging a Consumer Proposal, just like other borrowers who do not have it in their credit report. Having fully paid a Consumer Proposal and discharged it from your credit report shows to the mortgage lenders that you are a responsible borrower and are starting over on a new leaf.
Remember that your credit score suffered due to the outstanding debt, but after Consumer Proposal, your credit score should have improved by the time it is paid and discharged. Suppose you're interested in getting a mortgage after discharging a Consumer Proposal. In that case, you should speak with a local mortgage broker in Richmond Hill who has worked with other clients with similar situations like yours.
Is There a Mortgage Broker for People With a Low Credit Score?
If you're considering getting a mortgage but your credit score could be better, you may be surprised to learn that many mortgage brokers can help you.
Before applying, it's essential to identify any credit needs that need to be addressed and ask if they have worked with other borrowers in a similar situation like yours. If they can provide success stories with similar cases, you have found the right mortgage broker to help you qualify even though you have low or bruised credit.
Ask your mortgage broker about their qualifications and FSRA licensed number in Ontario. Work experience is essential, but a valid license is a legal requirement for anyone who wishes to broker a mortgage application dealing with low credit score borrowers. They will be able to answer any questions you have and help you navigate the mortgage approval process.
How We Can Help You With Your Debt
Debt can be a significant financial burden, and it can be hard to cope with when it becomes unaffordable. But that's where our Richmond Hill Mortgage Broker team can help. We can help you explore alternatives to your situation, with or without Consumer Proposal, and in most cases, you may still qualify for a mortgage. We understand how difficult it can be to make these decisions when you're feeling overwhelmed, and we are here to support you every step of the way.
You don't have to face this debt alone - our team will work with you one-on-one to reach your goals. So let us help end your financial struggles once and for all!
At Richmond Hill Mortgage Broker, we offer professional assistance with personal finances and alternative mortgage solutions. Get a free consultation today by calling us at +1 (289) 804-8604 or emailing us at apply@richmondhillmortgagebroker.com.
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