THINGS YOU MUST NOT DO WHEN APPLYING FOR A MORTGAGE
Do you know there are things you must not do when applying for a mortgage?
Have you been approved for a mortgage and waiting for the completion date to come?
Congratulations! You’ve found a home to buy and have applied for a mortgage!
You are undoubtedly excited about the opportunity to decorate your new home!
But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.
Well, it is not smooth sailing until AFTER the solicitor has registered the new mortgage.
Before going into details of things you must not do when applying for mortgage, let’s see the meaning of mortgage for better understanding.
What Is A Mortgage?
The term “mortgage” refers to a loan used to purchase or maintain a home, land, or other types of real estate.
The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest.
The property serves as a collateral to secure the loan.
A borrower must apply for a mortgage through their preferred lender and ensure that they meet several requirements, including minimum credit scores and down payments.
Mortgage applications go through a rigorous underwriting process before they reach the closing phase.
Mortgage types vary based on the needs of the borrower, such as conventional and fixed-rate loans.
Be sure to avoid these 10 things below or your approval status can risk being reversed!
1. Don’t change employers or job positions
Any career changes can affect qualifying for a mortgage. Banks like to see a long tenure with your employer as it shows stability. When applying for a mortgage, it is not the time to become self employed!
2. Don’t apply for any other loans
This will drastically affect how much you qualify for and also jeopardize your credit rating. Save the new car shopping until after your mortgage funds.
3. Don’t decide to furnish your new home or renovations on credit before the completion date of your mortgage
This, as well, will affect how much you qualify for. Even if you are already approved for a mortgage, a bank or mortgage insurance company can, and in many cases do, run a new credit report before completion to confirm your financial status and debts have not changed.
4. Do not go over limit or miss any re-payments on your credit cards or line of credits
This will affect your credit score, and the bank will be concerned with the ability to be responsible with credit.
Showing the ability to be responsible with credit and re-payment is critical for a mortgage approval
5. Don’t deposit “mattress” money into your bank account
Banks require a three-month history of all down payment being used when purchasing a property.
Any deposits outside of your employment or pension income, will need to be verified with a paper trail.
If you sell a vehicle, keep a bill of sale, if you receive an income tax credit, you will be expected to provide the proof. Any unexplained deposits into your banking will be questioned.
6. Don’t co-sign for someone else’s loan
Although you may want to do someone else a favour, this debt will be 100% your responsibility when you go to apply for a mortgage.
Even as a co-signor you are just as a responsible for the loan, and since it shows up on your credit report, it is a liability on your application, and therefore lowering your qualifying amount.
7. Don’t try to beef up your application, tell it how it is!
Be honest on your mortgage application, your mortgage broker is trying to assist you so it is critical the information is accurate.
Income details, properties owned, debts, assets and your financial past.
IF you have been through a foreclosure, bankruptcy, consumer proposal, please disclose this info right away.
8. Don’t close out existing credit cards
Although this sounds like something a bank would favour, an application with less debt available to use, however credit scores actually increase the longer a card is open and in good standing.
If you lower the level of your available credit, your debt to credit ratio could increase and lowering the credit score.
Having the unused available credit, and cards open for a long duration with good re-payment is GOOD!
9. Don’t Marry someone with poor credit (or at lease be prepared for the consequences that may come from it)
So you’re getting married, have you had the financial talk yet? Your partner’s credit can affect your ability to get approved for a mortgage.
If there are unexpected financial history issues with your partner’s credit, make sure to have a discussion with your mortgage broker before you start shopping for a new home.
10. Don’t forget to get a pre-approval!
With all the changes in mortgage qualifying, assuming you would be approved is a HUGE mistake.
There could also be unknown changes to your credit report, mortgage product or rate changes, all which influence how much you qualify for.
Thinking a pre-approval from several months ago or longer is valid now, would also be a mistake.
Most banks allow a pre-approval to be valid for 4 months, be sure to communicate with your mortgage broker if you need an extension on a pre-approval.
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Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.