Steps to Get Approved for Mortgages After Bankruptcy in Canada
Bankruptcy can feel like a hard reset button—emotionally, financially, and sometimes socially too. But here’s the part that surprises a lot of Canadians: bankruptcy does not permanently disqualify you from getting a mortgage. In many cases, you can qualify sooner than you think, especially if you rebuild the right way and work with the right lender strategy.
This guide breaks down mortgages after bankruptcy into clear steps—what lenders actually look for, what you can do to improve approval odds, and how to avoid common mistakes that delay your comeback.
Important note: Mortgage rules can vary by lender, province, and your specific credit profile. The goal here is to help you understand the typical paths and how to position your application for success.
Step 1: Know Where You Stand: Discharged vs. Undischarged Bankruptcy
Before any lender conversation gets serious, you need to know your exact bankruptcy status.
Discharged bankruptcy
A discharge means you’ve completed the bankruptcy process and your eligible debts were legally cleared. For mortgage qualification, a discharge is often a major turning point—many lenders want to see:
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Proof of discharge
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Time since discharge (often 12–24+ months for some programs)
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Re-established credit
Undischarged bankruptcy
If you’re still in bankruptcy, traditional mortgage options are more limited, but not always impossible. A purchase or refinance may still be possible in niche situations (often with alternative/private options), but it’s typically more expensive and documentation-heavy.
Takeaway: Your mortgage plan starts with your status. If you’re discharged, you’re already on the “rebuild and qualify” track.
Step 2: Rebuild Credit the Right Way (Not the Fast Way)
Lenders don’t just want “a higher score.” They want to see predictable, responsible borrowing behaviour after bankruptcy.
What usually works best
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Get 1–2 secured credit cards (or a secured card + small installment loan)
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Keep utilization low (a good target is under 30%, lower is even better)
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Pay on time every month—no exceptions
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Avoid applying for multiple new products close together
What hurts your mortgage chances
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Maxing out cards (even if you pay them off later)
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Missed payments after bankruptcy (this is a red flag)
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Lots of credit inquiries in a short time
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“Buy now pay later” stacking (it can show up and impact ratios)
Pro tip: Many Canadians rebuild credit but forget the “story.” A lender wants to see that the bankruptcy was a turning point and the pattern afterward is stable.
Step 3: Strengthen the “Mortgage File” Beyond Credit
Here’s the truth: after bankruptcy, lenders often weigh income stability and overall risk even more heavily than the score itself.
Key areas lenders evaluate
1) Income
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Consistency matters (same job/industry helps)
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Full-time, salaried income is simplest
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Self-employed borrowers may need extra documents (T1 Generals, NOAs, business financials)
2) Debt-to-income ratios
Two common ratios:
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GDS (Gross Debt Service): housing costs vs. income
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TDS (Total Debt Service): housing + other debt payments vs. income
Even if your score improves fast, high debt ratios can block approval.
3) Savings and reserves
Lenders love borrowers who can show:
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Down payment funds are legitimate and seasoned
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Emergency cushion (even 1–3 months of expenses helps)
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Closing costs are covered (legal, appraisal, land transfer tax, where applicable)
Bottom line: Credit is only one pillar. Income consistency + manageable debts + savings can make your application feel “safe” again.
Step 4: Choose the Right Lending Path: A-Lender vs B-Lender vs Private
A huge part of success with a mortgage after bankruptcy is matching your profile to the right lender type.
A-Lenders (banks and prime lenders)
Best rates, stricter rules. Often require:
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Strong re-established credit
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Time since discharge
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Solid income and low ratios
B-Lenders (alternative lenders)
More flexible underwriting. Often consider:
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Shorter time since discharge (in some cases)
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Higher debt ratios (within reason)
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More manual review of your file
You may pay a bit more in rate and fees, but it can be a stepping-stone strategy.
Private lenders
Most flexible, most expensive. Often used when:
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Credit is still recovering
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Income is harder to prove
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Time since discharge is short
Private mortgages can work when used responsibly, but they should come with a clear exit plan (for example: refinance into a B or A lender after 12–24 months).
Smart strategy: Many Canadians use a two-step approach: get approved with an alternative lender now, then refinance to a prime lender later once credit and time improve.
Step 5: Build a Strong Down Payment and Document the Source
Down payment rules vary depending on the lender and the strength of your file. After bankruptcy, lenders often want:
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A larger down payment (in some cases)
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Clear proof of where the down payment came from
Commonly accepted down payment sources
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Savings (preferably “seasoned” in your account for a period of time)
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Sale proceeds from another property
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Gift from immediate family (with a signed gift letter)
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RRSP (Home Buyers’ Plan may apply for eligible borrowers)
Avoid this mistake
Borrowing your down payment can hurt approval—especially if it raises your debt ratios or creates repayment risk.
Tip: Keep records organized: bank statements, gift letters, proof of transfers. Clean documentation can make underwriting much smoother.
Step 6: Expect Extra Scrutiny—and Prepare for It
When lenders see bankruptcy on a credit report, they often ask:
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What happened?
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Why won’t it happen again?
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What changed?
This is where a short, honest explanation helps.
A good “bankruptcy explanation” includes:
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What caused it (job loss, illness, divorce, business collapse, etc.)
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What you did to resolve it (completed bankruptcy, discharge)
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What’s different now (stable job, budgeting, reduced debt, emergency fund)
You don’t need a dramatic essay. You need a clear, calm narrative that makes sense and matches the rest of your file.
Step 7: Work With a Mortgage Broker Who Knows Post-Bankruptcy Approvals
Not every mortgage professional understands bankruptcy files. Post-bankruptcy mortgage approvals often require:
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Correct lender placement (prime vs alternative vs private)
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Tight packaging of documents
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Strategy for renewal/refinance into better rates later
A good broker can help you:
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Avoid applying to the wrong lender (which creates credit inquiries)
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Choose a stepping-stone option if needed
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Plan a timeline to move from higher-cost lending to prime lending
The goal isn’t just approval. It’s approval with a plan—so you’re not stuck paying more forever.
Common Mistakes to Avoid (That Delay Approval)
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Applying to multiple lenders at once (too many inquiries)
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Co-signing for someone else while rebuilding
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Carrying high balances on new credit cards
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Changing jobs right before applying (unless it’s a clear step up)
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Ignoring property taxes or other arrears (lenders will notice)
A Simple Timeline Example (Realistic “Game Plan”)
While everyone’s situation is different, here’s a common progression:
Months 0–3 after discharge
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Add a secured credit card
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Set up automatic payments
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Build a small emergency fund
Months 4–12
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Add a second trade line (if needed)
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Keep utilization low
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Focus on stable employment
Months 12–24
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Explore B-lender options if credit is improving
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Strengthen the down payment and documents
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Prepare for pre-approval (purchase) or refinance (if applicable)
24+ months
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Many borrowers can begin targeting stronger lender options if their profile is solid
FAQ: Mortgages After Bankruptcy (Canada)
1) Can I get a mortgage after bankruptcy in Canada?
Yes. Many Canadians qualify for a mortgage after bankruptcy, especially once they are discharged and have re-established credit, stable income, and an acceptable down payment.
2) How long after bankruptcy discharge can I get a mortgage?
It depends on the lender and your overall strength (income, credit rebuild, down payment). Some borrowers explore alternative options within 12–24 months post-discharge, while prime options may require a longer track record.
3) Do I need a certain credit score for a mortgage after bankruptcy?
There isn’t one universal number. Lenders look at your score and your recent payment history, credit utilization, income stability, and debt ratios.
4) Will I need a bigger down payment after bankruptcy?
Possibly. Some lenders may want a stronger down payment to reduce risk, especially if the bankruptcy is recent or your credit profile is still rebuilding.
5) Can I refinance my home after bankruptcy?
In many cases, yes—especially if you have equity and your income supports the payment. The lender path (prime, alternative, private) depends on your credit rebuild and time since discharge.
6) Is a B-lender mortgage a good option after bankruptcy?
Often, yes. A B-lender can be a practical stepping stone while you rebuild credit, with the goal of refinancing into a prime lender later.
7) Should I work with a mortgage broker for a post-bankruptcy mortgage?
Usually, yes—because lender selection matters a lot after bankruptcy. A broker can help reduce unnecessary credit checks, find the right program, and build a plan to improve your rate over time.
Wrap-Up: You Can Come Back Strong
Bankruptcy is a setback, but it doesn’t have to be permanent. If you focus on rebuilding credit responsibly, keeping income stable, managing debt ratios, and choosing the right lender path, getting approved for a mortgage after bankruptcy is absolutely achievable.
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