18 Jan

Warning! 8 Things That Could Overturn Your Mortgage Approval

General

Posted by: Bradley Cowan

Warning! You’re not out of the Woods until the Deal Closes

 

In last week’s post, we discussed the importance of understanding your credit score. In this week’s post you will be able to see why protecting your credit score is so important, and how avoiding the pitfalls of the 8 items on this list will help you do that.

 

To provide some context, the time frame, that we are looking at, is the period that falls between the Lender’s approval, and the Closing date.

 

So, the Lender has just approved your mortgage, and all is well. You have satisfied all of the Lender’s conditions and submitted all required documents. Life. Is. Good. You’ve been holding your breath for weeks, because, let’s face it, getting approval for any loan can feel a lot like a financial colonoscopy, and now it’s over. You can finally exhale, and celebrate. Maybe treat yourself to some luxuries that you have been putting off buying while your mortgage application was going through the approval process. And why not? You’ve earned it, right? Don’t do it! It’s a TRAP!

 

Recently, a colleague of mine, Cornell Turoch, shared this list of 8 things to avoid before you buy a home, with our Team. He outlines these to his clients, and I would like to share them with you, because there are some really great nuggets of information, here, that many people many not know. Also, remember, these points all made this list because people didn’t follow their Mortgage Broker’s advice, and their approvals got revoked. So, please heed the warnings.

 

8 Things to Avoid Before You Buy a Home

 

  1. Don’t apply for new credit: It may seem natural to apply for a credit card at a home improvement store or a furniture store when you are about to become a homeowner, but applying for credit can lower your credit score. Not only will you lose a few points because of a credit inquiry, but if you are approved for new credit, a lender may worry that you will spend up to your new credit limit and then default on your loan.

 

  1. Don’t close any credit accounts: You may be feeling that this is a good time to get your financial house in order by closing unused credit accounts or transferring your debt to a new credit card with a zero-interest balance transfer offer. While that’s a smart move financially, it’s a bad one for your credit score because you lose points when you have a higher usage of debt compared to your limit on one credit card and to your overall credit availability. Wait until your closing is complete before you make these changes.

 

  1. Don’t move your money around without a paper trail: Your lender will need the most recent bank statements before you go to settlement, so if you have any unusual deposits you will need to provide complete documentation of where the money came from. If possible, it’s best to move the cash you will need for your home purchase into one account before you apply for a mortgage. If not, make sure you have complete and accurate records readily available.

 

  1. Don’t increase your debts: In addition to your credit score, your debt-to- income ratio is extremely important to a loan approval. If you take on more debt you could be in danger of going above the maximum acceptable debt-to-income ratio.

 

  1. Don’t skip a payment or make a late payment: One of the most important elements of your credit score is your history of on-time, in-full payments, so don’t get so caught up in your move that you forget to keep up with paying basic bills.

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  1. Don’t buy a car: You may be feeling that a new car would be a nice addition to the driveway of your new home. Resist that feeling. Even if you can easily afford a new car, the depletion of your savings or the addition of a new car loan could derail your mortgage application. Wait until after you have moved to switch to a new car.

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  1. Don’t change jobs if you can help it, and don’t Quit your job: While a job change could mean a raise or a path to a better future, it could also delay your settlement. Your lender needs to verify employment and will need paystubs to prove your new income before your loan can go to settlement.

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  1. Don’t spend your savings: You’ll need cash on hand at the settlement for your down payment and closing costs and your lender may even verify your cash reserves one more time, so make sure the funds stay in place.

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Just because your mortgage application gets an approval, doesn’t mean that you are home and cooled out. Don’t let your guard down. Stay vigilant. Remember that your financial actions, and transactions have consequences, and, until you have the keys in your hand, the Lender can still change their decision. In other words, no matter how hard it is at this exciting time, it’s better to do nothing than to do anything.

If you have any questions, please feel free to contact me.

Bradley Cowan

Mortgage Agent

DLC – TLC Mortgage Group

P: (705) 868-2556

E: bradleycowan@dominionlending.ca

W: www.BradGetsFunding.com

11 Jan

Understanding Your Credit Score

General

Posted by: Bradley Cowan

One of the important factors in home ownership is understanding things like your credit score. Some people don’t pay much attention to this metric until they begin the mortgage discussion! However, you will find that your credit score is one of the most important factors when it comes to qualifying for a mortgage at the best rate – and with the most purchasing power.

Whether you qualify for a mortgage through a bank, credit union or other financial institution, you should be aiming for a credit score of 680 for at least one borrower (or guarantor), especially if you are putting under 20% down. If you are able to make a larger down payment of 20% or more, then a score of 680 is not required.

If you are not sure what your current credit score is, you can find out through Canada’s two credit-reporting agencies: Equifax Canada and TransUnion Canada. Once you have your credit score, always double check that there are no mistakes and ensure you dispute any problems if applicable.

WHAT IF I DON’T MEET THE MINIMUM CREDIT SCORE?
If your credit score is accurate, but does not meet the minimum requirements, you will want to look at your current debt. Home ownership is an incredible investment, but it is also costly. Fortunately, there are a number of things you can do to improve your credit score as well as your future financial success, including:

Paying your bills in full and on time. If you cannot afford the full amount, try paying at least the minimum required as shown on your monthly statement.
Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible. Work on paying the ones with the smallest amount owing first and work your way towards the larger amounts.
Stay within the limit on your credit cards and try to keep your balances as low as possible.
Reduce the number of credit card or loan applications you submit.
There is also the option of going with an Alternative Lender (or B Lender) if you are struggling with credit issues. A DLC Mortgage Professional can help review your credit score and provide you with options for your mortgage needs.

For any questions, feel free to contact me today.

P: (705) 868-2556

E: bradleycowan@dominionlending.ca