Don't derail your mortgage

Even if you’ve been pre-approved by your bank or a mortgage broker you could unwittingly derail your mortgage financing.

Here are four items that could go wrong. If you can avoid these types of issues, you’ll be more likely to receive a “final approval” green light from the mortgage lender.

You have insufficient documentation.

Mortgage lenders request a variety of financial documents when approving borrowers for mortgages. You can reduce the chance of document-related problems by rounding up your documents in advance.

his is why as your mortgage broker I always try to anticipate the documents that a mortgage lender is going to request and work with you to gather them before you have found your dream home.

You don’t have enough funds for your closing costs.

All mortgage lenders and the mortgage insurers require borrowers to have additional “cash reserves” in the bank, prior to closing to cover the closing costs. 

Borrowers can be denied a mortgage after being pre-approved if you can’t provide documentation confirming you have these funds available.

Generally the rule is you must be able to prove that you have 1.5% of the purchase price available for closing costs over and above your down payment funds.

You made a large purchase, or purchases and taken on additional debt since pre-approval.

Being pre-approved for a mortgage, or even approved if you are at that stage, doesn’t mean you can go out and make large purchases.

Debt-to-income ratios are very important during the mortgage process. This ratio is basically a comparison between the amount of money you earn and the amount you spend to cover your monthly debts.

Having too much debt can hurt your chances of getting mortgage financing.

To prevent these types of problems after pre-approval, avoid making major purchases or opening new lines of credit. Keep those credit cards in your wallet until you receive a final approval and until after you have moved into your new home.

Your income or employment situation has changed.

As your mortgage broker, I will pre-approve you based on your current income and employment situation. However, if your status changes sometime during the underwriting process, it could cause you to be denied the mortgage.

Just do everything within your power to keep your income and employment situation static until after you have found a home and moved in.

Many lenders will re-confirm your current employment status prior to funding your mortgage particularly right now as we are in the midst of the pandemic.

Here’s what you need to take away from this:

  • A pre-approval can be a helpful step in the mortgage process. It allows you to narrow your search to homes that fit your budget and secure an interest rate. But it’s not a guarantee of financing.
  • A pre-approval is not a mortgage commitment. Most lenders will not even review your application until a property has been found and you have an accepted offer.

As your mortgage broker, I will confirm that a lender will likely give you a mortgage for a certain amount, as long as your financial situation doesn’t change prior to closing and the lender also likes the property you are purchasing.

  • Even having a pre-approval letter does not mean you are home free. Things can still go wrong before the final closing causing the mortgage to be denied.

My role as your mortgage broker is to reduce the possibility of any of the above happening to you during the mortgage process and I will endeavour to make the process go as smoothly as possible.

It may seem like I’m asking many questions and requesting too many documents but that is what is required to ensure you are in the very best position to start your house hunting with confidence.

A mortgage pre-approval is the first step to home ownership. If you would like to start your journey to home ownership please visit here to get started or give me a call at 1-888-561-2679

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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