Lenders don’t give all credit problems the same weight when you apply for a mortgage. Bankruptcies are much more severe than being late on your bills. Let’s look at the different types of issues you could have in your credit report and how they affect your mortgage application.  

Late Payments  

Late payments are the least severe problem you could have on your credit report. Lenders could forgive a single late car payment. They will look at your payment history for the past several years. If you have a history of late payments, they’re going to consider you a credit risk. A Grande Prairie mortgage broker could find you a lender with a good interest rate on a mortgage if you’ve been paying all your bills on time for at least eight months.  


Collections are more severe than late payments. You should have a good explanation for why your late payments went to collections. If you can demonstrate a temporary hardship like a job loss, mortgage lenders may overlook it assuming the root cause is addressed – in this case, you found a new job or a separation is complete and you are now out of the hardship. They will want you to be caught up on your bills and have been employed at the same place for a while along with down payment saved to show life has now changed for the better. If you’ve had a number of bills go into collections over the years, you will have to mitigate the risk with more down payment or a co-signer.  


Judgements are the next step up from collections. These will always count against you. Lenders may give you some leeway if there is a valid explanation such as job loss or extended medical recovery. As long as the debt has been paid or settled and your bills are all now current, you could probably move into a new home. You may be able to accomplish this without waiting the year or two that you would have had to wait if the unpaid debt went into a consumer proposal.  

Consumer Proposals/Debt Consolidation  

These will prevent you for qualifying for a mortgage for at least a year, usually two. A Grande Prairie mortgage lender will require at least a year but ideally two of re-established credit paid on time and in full, they like to see revolving credit for this such as a line of credit or credit card. If you’re late on these payments, forget about getting a mortgage for some time usually another year probably two years. In contrast, a car loan and credit card both paid on time for two years after the consumer loan was discharged will make them see you as a worthwhile credit risk. Pay everything on time for at least a year after the consumer proposal is discharged, and you might qualify for a mortgage if you can put at least 5% down on the new home.  In this regard, consumer proposals  / debt consolidation is superior to bankruptcy.  


Foreclosure either as part of a bankruptcy or outside of bankruptcy is like kryptonite to mortgage lenders. You lost your home. They’re not willing to risk issuing you a mortgage for at least four years after the foreclosure. If the foreclosure was part of a bankruptcy, then you’re looking at the clock starting after the bankruptcy is discharged. You’ll then have to wait four years after the bankruptcy is discharged before you could be considered for a new home loan. And this requires four years of good payment history on new lines of credit.  

An A lender will require at least 10% down for favorable terms. If you can put more money than this down on a home, you may be able to qualify for a mortgage three years after the foreclosure.  


A bankruptcy doesn’t ruin your life, though it may feel like it at the time. Going through a bankruptcy doesn’t mean you’ll never be able to own a home again. If it has been two years since your bankruptcy was discharged, you may be able to qualify for a mortgage with at least 5% down possibly 10% down. This does require having a perfect payment history after the discharge. Note that any down payment has to be from your own resources – Mom giving you $10,000 to use toward the home loan counts against you.  

The main point is that you’ll have to have cleaned up your collections and judgements, started using credit responsibly, and continued to do so for several years for lenders to consider the bankruptcy truly behind you.  


Understanding how creditors view various black marks on your credit helps you determine when you’re eligible for a home loan and what you could do to ensure you qualify for a mortgage sooner rather than later. A Grande Prairie mortgage broker should be able to find you a mortgage lender despite your credit history, assuming you didn’t just get out of a bankruptcy. Reach out today and we can help you plan for your next home. We do not only get mortgages for our clients we help financially plan for a mortgage down the road and coach you until we get you into homeownership.