Ok so picture this: You just got a great pre-approval with a low rate hold from your unbelievably hard working, intelligent Dominion Lending Centre mortgage agent. Let’s call this hypothetical mortgage agent…Griffin Gillis (self-brag I know but after-all, it is my blog).
After this pre-approval you’ll know your purchase price range and the amount of down payment you’re comfortable putting down on a house. Then you’ll work with your real estate agent and find a perfect property; everything you’re looking for. You place an offer and your offer gets accepted; very exciting!
Your finances are in place and your offer gets accepted, you must be in the clear right?
The answer is most likely if you follow these guidelines. In one of my first blogs about pre-approvals it states, “a pre-approval is simply a snapshot of your current situation”. If you get a pre-approval months prior to your purchase and your situation has changed, your pre-approval mortgage that you used as a base to place an offer has also changed. This isn’t to scare anyone; it’s simply to inform you.
Below, Dominion Lending Centres’ marketing team has posted 5 guidelines that buyers need to be aware of in the time between the pre-approval and the final approval stage. Being aware of this will help your transaction go smoother.
EMPLOYMENT
When submitting a request for financing, whether a mortgage or car loan or to handle personal debt, one of the most important aspects the lender looks at is employment. If you were working at Company X for five years at $50,000 a year and just before your deal is finalized you change jobs, the lender will now require proof from the new job. This can include proof that probation for this new job is waived or new job letters and pay stubs at the very least. If you change industries, they will want to see more proof that you are capable of keeping this job. For any employment involving overtime or bonuses, the lender often requests a two-year average which you would not be able to provide at a new position. Another employment change that could hurt your financing approval would be if you decide to change from an employee to be self-employed. When it comes to financing, it is best to wait to make any major employment or life changes until after the deal has gone through.
DOWN PAYMENT SOURCE
As mortgage financing is based on the initial information provided, you will most likely need to do a final verification of the down payment source. If it is different from what the lender has approved, it could spell trouble for your financing approval. Even if you said that your down payment was coming from savings and at the last minute, your parents offered you the funds as a gift, it could affect your approval. This is an acceptable source of down payment, but only if the lender knows about it in advance and has included this in their risk assessment, but it can jeopardize a deal.
DEBT
A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Since the mortgage approval is based on how much you owed on that particular date, it is important not to increase your debt before the deal is finalized. Buying a new car or items for the new home must be postponed until after possession; even if they are “do not pay for 12 months” campaigns because you will need to fulfil those payments, regardless of when they start.
BAD CREDIT
One of the biggest roadblocks to mortgage approvals is credit card payments. When you enter the financing process, it is important that your credit score remains positive. If your credit score falls due to late payments, this can cause major issues with your financing. Even if you have a high-ratio mortgage in place which requires CMHC insurance, a lower credit score could mean a withdrawal of the insurance and removal of any financing approval.
MISSING IDENTITY DOCUMENTS
Before a deal is finalized, the lawyer must verify your identity documents and see that they match the mortgage documents. You may think this is obvious but it is important to use your legal name when you apply for a mortgage. Even if you go by your middle name or a nickname, all legal documents should match.
CONCLUSION
To summarize; keep the same job, the down payment source should not change, don’t incur any new debt, pay off any bills right away to keep your credit score high and always be honest throughout the entire home buying process. I understand that sometimes life presents opportunities and challenges at unexpected times. Please reach out to me if you plan on making any life changes that may affect your mortgage approval. The home buying process can be very rewarding and profitable but It’s important to stay in the know!