PROTECT YOUR MORTGAGE APPROVAL TIP 1 Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift in cash is not. Discuss the proper way to track your assets with your mortgage broker.
PROTECT YOUR MORTGAGE APPROVAL TIP 2 Don’t make any large purchases like a new car or a bunch of new furniture. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios…higher ratios make for riskier loans…and sometimes qualified borrowers are no longer qualifying. This is also true about Buy Now Pay Later programs, even if you don't need to make a payment for a year, the bank still calculates a payment equal to 3% of balance, eg. $4000 appliance package = $120/mth payment
PROTECT YOUR MORTGAGE APPROVAL TIP 3 Don’t co-sign other loans for anyone. When you co-sign, you are obligated. With that obligation comes higher ratios, as well. Even if you swear you won’t be making the payments, the lender will be counting the payment against you. This includes car loans, credit cards, computer loans, and mortgages. Parents if you are cosigning for your children (student loan, car loan, mortgage etc) remember it will show on your credit bureau too
PROTECT YOUR MORTGAGE APPROVAL TIP 4 Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is a consistency of accounts. Frankly, before you even transfer money between accounts, even personal to business or vice versa, talk to your mortgage broker.
PROTECT YOUR MORTGAGE APPROVAL TIP 5 Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your credit score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval. Even if you see a lower interest rate advertised elsewhere, it is very possible that your interest rate can be matched to the new rate, without switching to a new lender and applying for new credit (the same mortgage at a different lender/broker) In Canada a credit bureau can be pulled without a Social Insurance # so be cautious which personal information is given out.
PROTECT YOUR MORTGAGE APPROVAL TIP 6 Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more approvable. Wrong. A major component of your score is your length and depth credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score. An 'abandoned' credit card (one you never use) actually helps boost your credit score. Credit has little validity for financing until it is established for a minimum of 2 years, preferably 5 years.
PROTECT YOUR MORTGAGE APPROVAL TIP 7 Consider Mortgage Insurance that goes into effect at the time of the approval. This will provide you and your family peace of mind that you have Life Insurance, Disability Insurance, and Critical Illness Insurance between the mortgage approval and the date of possession. This is important for all mortgages, but especially for mortgages with an extended period between approval and possession such as custom homes, homes still under construction, and delayed possessions.