Mortgages and the entire home buying experience is a process that can last weeks, months, sometimes even years. From the early stages of pre-qualification, all the way to turning your keys for the first time on possession date, a lot can change and a lot can happen. The following article is meant to share with you the items and situations that can change and why some of them can change your approval to a decline in a snap.
From the moment you have an accepted offer on a home, the following areas on which your mortgage application is built, cannot change. It is even crucially important they do not change once you remove any financing conditions, as it will then be your legal responsibility to honor the purchase and sale contract regardless of a lender’s decision to change your application from approved, to declined.
Job Status- Don’t Quit Your Job This first point may seem like a no-brainer, but if you were offered a salaried job for $80,000 a year after just qualifying with a job only paying $40,000 a year on an hourly wage, wouldn’t you take it? Any changes to your income need to be reported to the lender and if your new job comes with a probationary period or any kind of special nuance, it may be un-usable, regardless of the dollar amount. If you are considering making any changes to your current job status or employment, please contact me first!
Income- Don’t Do Anything That Will Decrease Your Income Your mortgage application is pre-qualified and approved using specific ratios that are directly affected by your monthly income. Increases will help, but any decreasing changes to your monthly and or yearly income could alter your ability to qualify and be approved for your requested mortgage amount.
Don’t Apply for New Credit You are about to move into your new home... what’s the first thing you want to do? Buy furniture for it! What do most department and furniture stores offer customers? The ability to finance the purchase so you can pay later. This will result in new credit being added to your name and will alter your credit report. Same goes for applying for new credit cards, Sears Cards, Brick Cards, any kind of card- hold off for now.
Don’t Get Rid of or Draw on Existing Credit Your credit score is a major component in judging whether or not you will receive financing. Just like the point above, any changes you make can alter your mortgage application. This is because they take into consideration every dollar amount owed, credit limits available to you, the number of inquires you’ve had, as well as your overall score. Changes to any of these will alter your credit report which could alter your ability to qualify.
Don’t Co-Sign for a Loan or Mortgage for Someone Else Same as point number two with your application and ability to qualify being calculated based on ratios. Decreasing income negatively affects the qualifying ratios, same thing happens when you co-sign for someone else. You may have good intentions but being listed as a co-signor means you are 100% responsible for any payments if they are not made. Your income may not have decreased but your monthly payments have increased and that has the same net result on your qualifying ratios- it weakens them.
Don’t Spend Your Closing Costs You need to have 1.5% of the purchase price of your new property available to you in cash. This doesn’t mean you only need to show closing costs when you write an offer on a home, then once it is accepted you can spend it on the furniture you were just told you can’t buy on credit. If you can’t pay all closing costs and lawyer fees, you will not close your mortgage. If you do not close, you do not have a new home to move into. Also remember that the 1.5% closing costs need to be available to you until everything is signed and paid at the lawyer’s office.
Don’t Stop Paying Bills For those buying homes as well as re-financing them, this point of not paying your bills again comes down to changes on your credit report and potentially altering your ability to qualify. If you are waiting for money, especially money that is coming from the proceeds of a refinance before paying your bills, it can show up on your credit report as missed and significantly damage your qualifying ability. Keep paying your bills as your credit report can be requested by the lender or the lawyer at anytime through out the process.
Don’t Change Your Real Estate Purchase Contract Changes to the purchase and sale contract of the home you plan on buying can often change the purchase price of said home. Any changes here or to the down payment for example, will change the dollar amount we are requesting on your behalf from the lender. Please consult with me before any changes are made as it will have an impact.
Don’t List Your Property for Sale If you wanted to refinance your home, wait until all funds have been released before you sell. If a lender sees that the property you are taking money against is on the market to be sold, they can and may stop the transaction before it completes.
Don’t Accept Mortgage Advice from Unlicensed or Unqualified Individuals Every single person has a unique situation. Your mortgage application and new home is different from your parents, your best friends, and your new neighbour across the street. In a strata, it will be different than any other owner living in that building. If someone offers you “advice” or tries to offer you information they think will help you, causing you to second guess yourself, please consult me. This entire process is unique to one person - you. Being involved in all aspects and understanding your situation from day one is what makes me an asset to you, not the person across the street telling you “his guy” can get you an interest rate for 0.05% less. Always consult with me and if there are any doubts or questions you have about what has been happening or with what will be happening- ask. The sole purpose of my involvement is to represent your interests and provide you with the best financing options with the best service possible.
Once the closing date of your mortgage has come and gone and you have the keys to your new home, you can ignore these points (although some should be maintained for financial responsibility purposes). These situations, as mentioned above, are the foundation of what your application for financing is built on. Any structural changes and the entire approval can change. Once you are pre-qualified, the most important thing you can do is continuing living in the same manner until your future home, is your new home.
Written by Ryan Oake
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