You’ve recently received approval for your home loan application and that’s great news! You’re a step away to reaching your dream home. While the odds look like that you’re indeed within grasp, don’t get too excited. Always be on the lookout to make sure that your mortgage deal gets closed by keeping your financial ground solid.
Home loan approval is not yet the finality, but part of the process of securing the mortgage. Because even at that stage, the lender can still cancel your approval. Let’s just say that your loan is ‘approved with conditions’ at such stage and underwriting conditions will still be required from you.
Comply promptly to additional requirements and respond to queries timely. While on this limbo of getting the deal closed, it is best to make sure you are financially fit.
We recommend you to follow these 9 tips, so your lender would get final assurance to seal your mortgage deal.
1. Changing jobs or employers is a bad idea
Lenders like to see that you have stable employment and switching jobs or careers can greatly affect their decision to approve your mortgage on closing. Know that job tenure is an important factor in getting you approved
2. Don’t apply for more credit
Do you intend to buy a new car or fund a home renovation using your credit? Put that to a halt while your mortgage is not yet a done deal.
Adding more credit will have a huge impact on how much money you will be approved for and may also affect your credit rating. It will give the lender the impression that you’ll have lesser money to satisfy your mortgage commitment with them in the future.
Remember that most lenders run a final credit report before the closing of your mortgage to make sure you are still in good financial standing. Any new changes in your credit will come to light at that time and may affect their approval decision.
3. Maintain credit profile
Be sure to make all your payments on time and not to go over your limit on your credit cards or lines of credit.
Missing or late payments and overusing your credit can indicate that you are not financially responsible and the lender may question whether you will be able to make your mortgage payments on time.
4. Make your bank transactions credible
Be cautious of large sums of money deposited into your bank account.
You will be required to provide a minimum of 6 months of your bank account statements prior to getting your mortgage finalized. If you have any large deposits into your account outside of your regular income sources, this may raise red flags.
For example, if you recently sold a car, you will want to keep the bill of sale. Or if you received an income tax refund, you will need to show proof. Any deposits indicated will need to have a paper trail showing where the funds came from or they will be questioned by the lender.
5. Save your own credit for you
With this, you will want to avoid co-signing a loan for someone else. In the eyes of the lender, this debt will be seen as 100% liability towards you. Co-signing for a loan will show up on your credit report and will also lower the amount you can qualify for on your mortgage. Worse, it can be a reason for your loan not pursuing.
6. Be truthful
Be honest with the information you give your mortgage broker. The information you give your mortgage broker upfront is what will be used to qualify you for your mortgage. After all, you have signed the clause that says, “All information is true and correct…”
You should be ready to provide your details about your income, properties owned and other assets, as well as any debts and your financial history, including if you have been through a power of sale, bankruptcy, or a consumer proposal.
Ultimately, all your financial details will need to be verified with pay stubs, investment, and banking statements and your credit report, so you might as well be honest from the beginning.
7. Keep the credit you have
You want to give the impression that you’re credit free, so you want to settle on the other credit and loans that you have. Sounds like a good idea, right?
Even though it sounds like it would be favorable, as in having less available debt, this could actually have a negative impact on your credit score.
By decreasing the amount of debt you have available, you may actually increase your debt-to-credit ratio and lower your credit score.
Keep in mind that current credit doesn’t mean you’re not capable to get the home loan. In fact, your credit with a good history of repayment is actually very good and shows positively on your credit behavior.
8. Know your partner’s finances
If you plan on getting married while trying to get a mortgage, your partner’s credit can affect your ability to get your mortgage approved. Why? Because in marriage everything you own together, including debt is conjugal.
If there has been a history of financial troubles on either party, be sure to discuss them with your mortgage broker upfront so you know what your options will be.
9. Make sure your approval is up-to-date
The mortgage environment is always changing. Requirements to qualify, changes in mortgage products and rates, as well as changes in your credit will all affect the mortgage products you will be able to get.
If you have a pre-approval from several months ago, it may not be valid in the current mortgage environment. Most lenders will consider a pre-approval valid for up to 4 months.
Be sure to contact your mortgage broker if you need an extension on your pre-approval.
By following these tips, we hope that your current or next mortgage will get final approval. But remember to take loans and mortgages wisely. Guard yourself to make smart decisions and not fall on compulsive credit buying behavior.