5 THING NOT TO DO WHEN GETTING YOUR MORTGAGE
The mortgage application process is very involved and detailed. There are a lot of moving parts and lots of elements to a person’s financial situation are under scrutiny. At the same time, the process is very emotional, stressful, and exciting. People want to plan for the future and get into the home and do a million things the moment they know it’s going to be theirs. However, there are several things that buyers often do that can derail their home ownership dreams if they’re not careful. Here is a list of 5 common mistakes that people make during the process of getting their mortgage:
1. Going on vacation during their closing date
This, bizarrely, is something that happens so often it baffles me. Several times a year, I will have a borrower attempting to complete on their purchase and for the week prior to and including their completion date, they decide to leave town on vacation. It creates a situation where we need to get everything done, all money moved, and all documents signed at the lawyers before the borrower leaves town. We then have to pray that there are no surprises, delays, or issues with the financing as the person isn’t here to deal with it. If you are making the largest purchase of your life, make sure you stay in town throughout the process.
2. Missing mortgage payments
This may seem like an obvious one, but I have had several borrowers who, knowing their home is sold and they’re getting the next one, may opt to not pay the last mortgage payment so they can use the funds for other things for the new house. If the lender that is doing the new mortgage gets wind of it, you may not have a mortgage for the new home. Make sure to keep your current mortgage current the entire time.
3. Incurring credit card debt for new furniture or what have you
In the excitement of getting a new home, people often will want to make some pre-emptive purchases for their new home. The easiest way to do it? A credit card. However, incurring additional debt for new appliances, furniture, or what have you, can jeopardize your current approval if the debt servicing is tight. Meaning, if you have to stretch (or if your broker had to stretch to get you approved) for the new place, the extra small amount of credit card debt could push your debt servicing to a point where you no longer qualify for the new home. Don’t incur new consumer debt prior to your completion date. Wait until you own the new home to splurge on new things for the home.
4. Buying a new car or getting a lease
Similar to the prior point, incurring a new lease payment or car loan payment can jeopardize your approval. From the time you are approved, until completion, sit tight. Don’t make any large purchases or incur any new debt.
5. Losing or changing jobs
Once you have your new mortgage approved, do NOT change jobs. The entire basis of your mortgage approval will be your income. If that amount changes, even if it goes up (but may have a probationary period) this can result in the lender cancelling your approval if they don’t feel the new job will supply the same income. Lenders are never legally bound to lend to you for a mortgage. They can, and will, pull the approval if there is a material change in your ability to repay the loan, and changing jobs is the epitome of what that would be. Try and keep everything the same from the time your mortgage is approved until your completion date.
In almost every one of the examples above, the lesson is: “don’t make any material changes in your financial position.” The banks are assessing your ability to repay their loan, and any changes that you make during the period from the time you are approved to the time you complete on the home can render your approval invalid. Stability is everything in the lending business, so try and remain as stable, debt free, and gainfully employed as you can during this sensitive period of time.
Rowan Smith, MBI, AMP
Senior Mortgage Planner / Partner, DLC – City Wide Mortgage Services
Direct Line: 604.657.6775 | Direct Fax: 1.888.282.5760 | E-mail: rowan@citywidemortgage.ca
Website: www.rowansmith.ca
City Wide Mortgage Services, An independent member of Dominion Lending Services
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