It is an exciting time to purchase a home and get approved for a mortgage. However, things can change in life before the completion date. Any changes in your credit usage and score could affect the mortgage amount you qualify for.
Before reversing your mortgage approval status or jeopardizing your financing, here are the 10 mortgage mistakes you should be aware of:
OVERSTATE YOUR APPLICATION
Be honest on your mortgage application – provide accurate information on your income, properties owned, debts, assets, and your financial past. Even you have been through a foreclosure, bankruptcy, or consumer proposal, you should disclose this upfront to avoid any undesired last-minute surprises.
I THINK I CAN
Many people assume they will be approved for mortgages. However, the first step is to get an actual pre-approval from the bank. Most pre-approvals have validation for 120 days. In case you are not home hunting tomorrow, your pre-approval will come in handy if a new home comes in an unexpectedly future.
MY BANK TAKES CARE OF ME
It is easy to simply sign up with your existing bank. However, you could be paying thousands more than you need to without even knowing it. With access to multiple lenders and financial institutions, a mortgage professional can help you find a mortgage with the best rate and terms to meet your needs.
NO DOWN PAYMENT
Your down payment is an important part of homeownership. It reduces the overall mortgage amount you need and increases the amount of equity right from the start. It also shows the bank you are serious about. The minimum down payment is 5% (with mortgage insurance) for homes under $500,000. A 20% down payment is recommended to avoid paying mortgage insurance.
CHANGING JOBS
It is important not to change jobs if you are in the middle of the approval process. Banks prefer to see an established employment history as this indicates your financial stability. You should wait for any major career changes until after your mortgage has been approved and have the keys to your new home.
YOLO
Getting additional loans while you are currently in the midst of finalizing a mortgage application can drastically affect what you qualify for. This can even jeopardize your credit rating. You should save any big purchases, such as a new car, until after your mortgage has been finalized.
CREDIT OVERUSE
Mortgage financing is contingent on your credit score and your current debt. Do not go over any limits on your cards or lines of credit, or miss any payment dates. This will affect whether or not the lender sees you as a responsible borrower.
TOO MUCH DEBT
Overusing credit cards or lines of credit can put you at risk for debt overload. Also, large purchases such as a new car can push your total debt servicing ratio over the limit (how much you owe versus how much you make), making it impossible to receive financing. Before you start considering a new home, make sure your current debt is under control.
LARGE DEPOSITS
The bank requires a 90-day history of all down payments and funds for the mortgage when purchasing a property. Any deposits outside of your employment or pension income will need to be verified with a paper trail – such as a bill of sale for a vehicle, or income tax credit receipts. Unexplained deposits can delay your mortgage financing or put it in jeopardy.
MARRYING INTO POOR CREDIT
Your partner’s credit can affect your ability to get approved for a mortgage. If there are unexpected financial issues with your partner’s credit history, make sure to discuss them with your mortgage broker before you start shopping for a new home.
If you are currently looking to start the process, reach out to me today to ensure that you do things the RIGHT way to succeed with your home purchase.