Don’t jeopardize your mortgage: factors that can affect the approval process

You saved enough money for the down payment for your new home and now you are excited to buy a property. You also spent a considerable amount of time looking for the right home and your mortgage has been approved. However, did you know that significant changes to your finances can affect your mortgage approval? In fact, lenders can cancel your mortgage approval any time before it closes if your financial situation changes. Which brings us to the point of this article: the mortgage approval process is about more than having the down payment.

Some of the other factors lenders also consider are your income, employment history, credit history and property, among other things. Most lenders request that credit bureau reports are pulled within 30 days of the mortgage approval, and they may even request a new one between the mortgage approval and funding date, especially when there is a long period between the two.

Helpful tips

Keep these factors in mind during the time between when your mortgage is approved and when you receive the funds of your mortgage.

• Don’t buy a new car or trade-up to a more expensive lease. At this time, it could create an issue, as the car payments could put you at the top of your debt servicing. An increase/ additional payment may make you ineligible for the mortgage you need.

• Don’t quit your job or change jobs. Even if it’s a better-paying job, you still are likely to be on a probationary period. If in doubt, call your mortgage expert and he or she can let you know if this may jeopardize your approval.

• Don’t change industries, decide to become self-employed or accept a contract position even if it’s within the same industry. Any changes could definitely jeopardize your mortgage approval.

• Don’t transfer large sums of money between bank accounts. Lenders get especially skittish about this one because it looks like you are borrowing money. Be ready to document cash transactions or money movements.

• Don’t delay paying your bills on time, even ones that you are disputing. This can be a legitimate deal-breaker. If the lender pulls your credit record just prior to the closing and sees a collection or a delinquent account, the best you can hope for is that they make you pay off the account before they will fund your mortgage. You don’t want to have to scramble to pay off a debt at the last minute or even worse, put your approval at risk!

• Don’t open new credit cards or apply for any new type of credit. Just wait until after your funding date.

• Don’t co-sign a loan for anyone. You may completely trust the person you are co-signing for and know they can make the payments. However, as a co-signer, you are legally responsible for making any of the payments if they are not made. This could affect your ability to meet your mortgage payments.

• Don’t accept a cash gift without properly documenting it – even if this is from proceeds of a wedding. If you have a bunch of cash to deposit before your funding date, give your mortgage expert a call before you deposit it.

• Don’t buy furniture on the “Do not pay for XX number of years plan” until after funding. Even though you don’t have to pay now, it will still be reported on your credit bureau, and will become an issue, especially if your mortgage approval was tight on the debt service ratios to begin with.

Due diligence

Buying a home and getting approved for a mortgage is not meant to be a difficult process. It is important to do your due diligence and know as much as possible and make informed decisions on your path to homeownership. If you are in doubt, it’s always best to call your mortgage expert before making a move that could jeopardize your approval.