Hi Everybody, Aleem here with the Mortgage Specialist in Vancouver, Canada.
While many borrowers are concerned with what they need to do in order to qualify for a mortgage, today I’d like to address some things that borrowers should NOT do once approved for a mortgage.
There are many things you can do to educate yourself about the home buying process, and our mortgage purchasing section is a good resource for you to start.
1) Don’t switch banks or move money around from bank to bank, or from account to account. As your lender reviews your mortgage application, you will likely be asked to provide bank statements for the last three months on your chequing accounts, savings accounts, money market funds and other liquid assets. This part of the process is vital to satisfy the down payment condition of your financing. To eliminate potential fraud and to satisfy the anti money laundering act, most lenders require a detailed and clear paper trail to document the source of all of the applicants’ funds. Changing banks or transferring money to another account – even if it’s just to consolidate funds – could make it difficult for the lender to document your funds. As a rule of thumb, you should call us if you are thinking about this at all.
2) Don’t disregard your lender’s requirements. You may have been pre-approved for the mortgage but your work with the lender is far from over. In order to process your loan, you need to meet certain requirements. Your lender will need copies of your bank statements, tax returns and other paperwork. It is up to you to get it to your mortgage originator as soon as possible. Failure to submit certain qualifying documents could cause you to lose your loan and the financing you need to buy your home.
3) Don’t quit your job. Lenders like to see a consistent job history. Generally, changing jobs will not affect your ability to qualify for a mortgage loan – especially if you are going to be making more money. But for some people, getting a new job during the loan approval process could raise some concern and affect your application. One of the key changes that can have the opposite impact on your financing then you think is switching to a consultant or becoming self-employed. While doing so may see you earn more money, the reality is that banks view these types of employments differently. Review the types of employment statuses here, but again, as a rule of thumb, before you act on any changes, get in touch with us.
You may be able to change jobs as long as it can be verified and the new job is in the same line of work as you had before. However, if you have to go through a probationary period at your new place of employment, this for sure will adversely affect your mortgage approval.
4) Do not co-sign on a loan for anyone else. Although you will not be making the payment, in the lender’s eyes you are still responsible for the payments and will therefore be held accountable.
Remember that once you apply for a mortgage, you are involved in an ongoing process, and anything that happens between your first application and the day of closing can be considered by the lender.
5) After applying for a mortgage make sure that you do not continue shopping around with other companies. When initially looking for a lender do your shopping and comparing of rates, payments, and closing costs and once you decide on a mortgage professional stick with them (unless you are completely unsatisfied with their service for some reason). This is very important to follow, and one of the advantages of using the services of a mortgage professional is that you only have to go through one credit check.
You might think that it is smart and to your advantage to continue to shop around for the best deal.
The reality is, if you continue to allow other mortgage companies to look at your credit and/or apply with other companies this can negatively affect your credit scores. There have been situations where borrowers have continued to apply for financing for mortgages and/or other credit and it has hurt their credit enough to disqualify them for the mortgage altogether, or enough to force them to accept a much higher interest rate. If you have questions about what to do or not to do, please contact your mortgage professional first.
Don’t let this happen to you. Be honest and upfront with your mortgage professional and stay in touch throughout the entire application process all the way through closing to guarantee a smooth hassle free transaction.
6) Especially don’t be tempted by the buy now, no payments for 12 months deals at the furniture stores. Even though you don’t have to make a payment, this will still affect your credit negatively and it will also still affect your debt ratio.
**Do not forget to, ignore, or neglect to tell your mortgage broker about any material changes in the purchase agreement you and the seller come to agree upon after the mortgage process has begun. A slightly lower sale price can alter the loan-to-value ratio and requires re-submission of loan documents. Your mortgage broker and lender have to be made aware if any addendum is later attached to the purchase contract.**
After applying for a mortgage be sure to advise your mortgage broker of any changes in your marital status or name changes. This will help you avoid problems with the final closing documents and/or title.
7) Be certain not to lease a car or allow a car dealer to “pre-qualify” you for a car lease or loan. It doesn’t matter whether or not the car is new or used, because either way this would fall under the category of taking on new debt, and is a very common reason for individuals, particularly those making purchases for the first time, run into complications with their mortgage application process after the fact. If you have any need to make any further applications for substantial credit, please give us a call to discuss first.
On another note, once you are approved and are getting ready to move in, it’s a good idea to give yourself a couple of extra days if possible to schedule movers, landscaping companies or and other repairs for the new house. This includes any renovations that you want to start on as well. This will give you extra time to get the closing completed and the transaction funded. If you schedule movers or other companies the same day as closing or even the day after you might be in for a stressful situation if for any reason the closing is delayed.
Always consult with your mortgage professional when there is a question regarding any of this because it can cost you your home loan.
The best rule of thumb is, after applying for a mortgage to not let anyone pull your credit or apply for any new credit at all. Try to keep everything the same as far as credit goes as when you where initially approved.
It would surprise you how many loans are declined due to homeowners doing these things mentioned above. When in doubt, just stop what you’re doing and give us a call.
From the Mortgage Specialist, I’m Aleem Peermohamed