For many Canadians, filing a consumer proposal is necessary to regain control of their finances. However, what happens when you’re ready to take the next step in life—like buying your first home—but you have a consumer proposal on your record? While a consumer proposal helps you settle your debts, it can leave a mark on your credit file that may make homeownership seem out of reach. But don’t worry—with the proper guidance, your dream of getting a mortgage in a consumer proposal is still possible!
At Sunlite Mortgage, we have helped hundreds of individuals who have asked, “Can I get a mortgage after a consumer proposal?” successfully navigate the home-buying process and secure their first home. This blog will walk you through the challenges and provide practical solutions for purchasing a house during or after a consumer proposal, including a case study of how one of our clients overcame obstacles to become a homeowner.
The Challenges of Buying a Home After a Consumer Proposal
Filing a consumer proposal provides financial relief, but it also creates hurdles when applying for a mortgage:
Credit Impact: A consumer proposal is reported on your credit file as an R7 rating, indicating to lenders that you’ve settled your debts through a negotiated agreement, which can negatively affect your credit score.
Rebuilding Credit: After filing, you’ll need time to rebuild your credit score, as lenders typically look for a history of responsible credit use.
Lender Guidelines: Different mortgage lenders have their eligibility guidelines when lending to individuals with a consumer proposal on record. Understanding these guidelines can help you better navigate the process.
Understanding Lender Guidelines
Not all lenders are the same, and depending on where you are in your recovery after a consumer proposal, some may offer more favourable terms than others. Here are some important factors:
Loan-to-Value (LTV) Ratio: Traditional mortgage lenders, such as A-lenders (big banks), typically do not lend to borrowers who are in a proposal or after some time or once you have rebuilt your credit if your credit is still recovering. Some lenders are more flexible, often offering lower LTV ratios, allowing you to qualify but with a larger down payment of at least 20% of the purchase price. The Loan-to-Value (LTV) Ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. A lower LTV ratio means a larger down payment and a higher chance of mortgage approval are required.
How Long After a Proposal Can You Get a Mortgage? Different lenders have different policies on how soon you can get a mortgage after filing a consumer proposal:
Some lenders usually require the proposal to be fully discharged for at least 2 years, and the applicant must have a strong credit rebuilding history for another two years.
Other lenders are typically more flexible and may offer mortgage options after one year of completing your proposal, sometimes even earlier, giving you hope for a quicker path to homeownership.
Some lenders may offer mortgage financing even while you’re still completing your proposal, though the terms may be less favourable, and you must have a 20% down payment, plus you must pay off the proposal to get a mortgage.
What Does Established Credit Look Like? To be eligible for a mortgage post-consumer proposal, lenders typically expect you to have re-established your credit:
Most lenders want to see at least two active revolving credit (credit cards) for at least 1 to 2 years after the consumer proposal.
They also look for consistent, on-time payments and responsible credit usage. The keys are to keep credit card balances low (below 70% of your credit limit) and avoid missed payments, empowering you to take control of your financial future. Some lenders may be more lenient with your credit score but will want to see that you’ve taken steps toward rebuilding your financial profile.
Case Study: From Debt to Homeownership—Sarah and Ahmed’s Story
Let’s look at Sarah’s journey, a Sunlite Mortgage client who overcame financial challenges to buy her first home while still in a consumer proposal.
Background:
Sarah, a young professional, earned a six-figure salary but spent more than she made. Over three years, her debt ballooned to over $100,000. She was paying $2,500 in rent, $3,000 on bills, and $750 for car payments. Unable to manage her expenses, Sarah filed a consumer proposal to settle her debts and regain control of her finances.
The Challenge:
Seven months into her proposal, Sarah’s life took a turn. She met Ahmed, fell in love, and just four months later, they decided to get married and purchase a home together. There was one problem—Sarah was still in her consumer proposal. Even though she had accelerated her payments to exit the proposal early, she still had about a year of payments remaining. Renting was no longer an attractive option for them. However, Sarah was concerned that her consumer proposal would prevent her from qualifying for a mortgage.
The Solution:
Sarah and Ahmed contacted Sunlite Mortgage, and we devised a solution that allowed them to buy their home without waiting until the consumer proposal was discharged. Here’s how we helped Sarah:
Assessing Financial Options: We reviewed Sarah’s financial situation, including her income, proposal payments, and Ahmed’s credit and income. We explored the possibility of getting the mortgage in both names to strengthen the application.
Choosing the Right Lender: While some lenders would have required Sarah to wait until her proposal was fully discharged, we worked with a lender willing to consider her application even though she was still in her proposal, which would need to be paid out before the mortgage was funded. This lender focused on the fact that Sarah had a high income and was making progress in paying off her proposal.
Customized Mortgage Terms: The lender offered flexible terms that matched Sarah’s situation. Although the interest rate was slightly higher than some other lenders, it allowed her to secure the financing she needed to buy her home.
Credit Rebuilding Plan: We guided Sarah in rebuilding her credit while managing her mortgage, meeting with her every six months for the first two years of the mortgage and then annually. A Credit Rebuilding Plan is a structured approach to improving your credit score over time. This plan helped her improve her credit score over time, making refinance at a lower rate easier once her proposal was fully discharged.
The Outcome:
With the proper guidance and lender, Sarah and Ahmed were able to buy their first home—a dream that seemed out of reach just months earlier. By working with Sunlite Mortgage, Sarah navigated the complexities of obtaining a mortgage while still in a consumer proposal, proving that homeownership is achievable even when facing financial challenges.
How Sunlite Mortgage Can Help You Buy Your First Home After a Consumer Proposal
Like Sarah, you can become a homeowner even after filing a consumer proposal. Here’s how Sunlite Mortgage can help you:
Credit Repair Guidance: We offer practical advice on how to rebuild your credit after a consumer proposal. Whether through secured credit cards or consolidating existing debt, we’ll guide you through the steps needed to improve your financial profile.
Flexible Lending Options: We work with various lenders, including some who specialize in helping individuals with non-traditional credit histories. These lenders offer more flexibility with loan-to-value ratios and credit requirements.
Tailored Mortgage Solutions: We understand that everyone’s financial situation is different. Whether you’re rebuilding your credit or need flexibility on down payments and terms, we’ll customize a mortgage solution that works for you.
Refinancing Your Mortgage in a Consumer Proposal: If you’re already a homeowner and still in a consumer proposal, you may also be able to refinance your mortgage. We’ve worked with many clients to help them secure refinancing options that allow them to continue paying off their debt while keeping their homes.
Experienced Guidance: Having helped hundreds of Canadians, Sunlite Mortgage has the expertise to help you navigate the home-buying process after a consumer proposal. From the initial consultation to the final closing, we’ll be by your side, ensuring you get the best mortgage possible.
Filing a consumer proposal doesn’t mean your dream of homeownership is out of reach. With the proper guidance and careful planning, you can rebuild your financial health and buy your first home. At Sunlite Mortgage, we specialize in helping clients like you overcome economic challenges and navigate the path to homeownership.
If you’ve completed a consumer proposal and are ready to explore your home-buying options, contact us today. Let us help you start your quest for homeownership and achieve your dream of owning a home.
