Once you’ve been pre-approved for a mortgage, it’s important to be cautious about your financial decisions to ensure that your approval remains valid and you secure your desired loan. Believe it or not, being approved for financing doesn’t mean you are completely “in the clear” and your home purchase is guaranteed to be funded. We’re here to tell you: don’t do this if you’ve been approved for a mortgage!
There are some deal-breakers that could cause you to lose your mortgage approval, and could put your home purchase in jeopardy!
Here are the top things to avoid:
1. Taking on new debt:
Once you’ve become approved for a mortgage, avoid acquiring new debt, such as opening new credit cards, taking out personal loans, or making major purchases on credit. This can negatively affect your debt-to-income ratio and your credit score, and may scare your lender into changing their mind about your mortgage.
2. Changing jobs or careers:
Lenders like to see stable employment and income history. Changing jobs or careers during the mortgage process can raise concerns for lenders. If possible, it’s best to wait until after closing day to make any significant career changes.
Related: What Happens On Closing Day
3. Missing payments:
Continue to pay all your bills on time. Late payments on existing debts can harm your credit score and may jeopardize your pre-approval status.
4. Co-signing for someone else:
Co-signing for a new loan or credit line can increase your financial liability, affecting your debt-to-income ratio. It’s best to avoid this until after you’ve closed on your mortgage.
5. Making large cash deposits:
Large or undocumented cash deposits into your bank accounts can raise red flags for lenders. Maintain clear records of the source of any large deposits to avoid complications.
6. Closing or consolidating credit accounts:
Closing credit card accounts or consolidating debt may negatively impact your credit score and alter your credit history. Lenders may check your credit again before closing.
7. Increasing your credit card balances:
High credit card balances relative to your credit limits can hurt your credit score. It’s advisable to keep your credit card balances as low as possible, and definitely don’t request a balance increase during the mortgage process!
8. Changing your financial situation:
Major financial changes, such as getting a divorce or liquidating assets, can disrupt your financial stability and jeopardize your mortgage approval. You need to maintain a stable financial situation to keep the confidence of your lender.
9. Skipping required documentation:
Lenders may ask for additional documentation throughout the mortgage process. Failing to provide requested documents promptly can delay or jeopardize your approval. Make sure you are diligent and on time with any documentation requests from your lender.
10. Ignoring interest rate changes:
Interest rates can fluctuate between pre-approval and closing. Your REALTOR® should be up-to-date with when rate announcements are expected from the Bank of Canada. Stay informed about interest rate changes and discuss your options with your lender if rates move significantly.
11. Not communicating with your lender:
Maintain open and consistent communication with your lender. If any significant changes occur, inform your lender promptly to address potential issues.
12. Skipping a final credit check:
Some lenders may perform a final credit check just before closing to ensure your financial situation hasn’t changed significantly. This is generally when these problems are discovered by lenders, and the status of your mortgage approval is put in jeopardy. Make sure you’re ready for this final credit check!
Remember that pre-approval is not a guarantee of a mortgage.
If you hope to keep your purchase alive, don’t do anything – from application to closing – that might change your financial picture and sabotage your final approval. This means no shopping on credit for appliances, furniture or anything else. Don’t switch jobs, fall behind on your bills, co-sign a loan for anyone, or in any way reduce the income stated on your application.
By and large, most real estate deals conclude successfully. And by educating yourself on how to maintain financial stability, your mortgage will go through and you’ll be moving into your next home in no time!