Okay, so here we are, you've worked with your realtor to find your dream home and secure financing for your mortgage. What many people don't realize is that, you should never make changes to your financial situation without first consulting with your lender. Changes to your financial situation before the mortgage funds could cause your mortgage to be reduced or even declined. Here's a list of the 10 things you should never do between your accepted offer and mortgage approval and the time you close on the property.
#1 - ‘Your job’Don't quit your job. This might sound obvious, but if you quit your job this employment change will be have to be reported to the lender. From there, you'll be required to support your mortgage application with your new employment details. And even if you've taken on a job that pays twice as much as in the same industry, there still might be a probationary period and the lender might not feel comfortable with proceeding.
#2 - ‘Your income’Don't do anything that would reduce your income. Kind of like point one, don't change your status at your existing employer. Getting a raise is fine, but dropping from full-time to part-time status is not a good idea. The reduced income will change your debt service ratios on your application and you might not qualify anymore.
#3 - ‘Credit’Don't apply for new credit you're probably excited about getting your new home especially if it's your first home. However, it's not a good time to go shopping taking out new credit cards. So, if you find yourself at the brick shopping for new furniture and they want you to finance your purchase right now, don't. By applying for new credit and taking out new credit cards, you can jeopardize your mortgage.
#4 - ‘Existing credit’Okay, in the same way that it's not a good idea to take out new credit, it's best not to close any existing credit either. The lender has agreed to lend you the money for a mortgage based on your current financial situation. And this includes the strength of your credit profile. Mortgage lenders and insurers have a minimum credit profile required to lend you money. If you close active accounts, you could fall into an unacceptable credit situation.
#5 - ‘Co-signing’Don't call sign for a loan or a mortgage for someone else. You may have the best intentions in the world, but if you co-sign for any type of debt for someone else you are 100% responsible for the full payments incurred on that loan. This extra debt is added to your expenses and may throw off your ratios and out of line. Meaning you might not qualify anymore.
#6 - ‘Your bills’Don't stop paying your bills. Although this is still good advice for people purchasing homes, it is more often an issue in a refinancing situation. If we are just waiting on the proceeds of a refinance in order to consolidate some debts, you must continue making your payments. If you choose not to make your payments, it will reflect on your credit bureau and it could impact your ability to get your mortgage. Best advice is to continue making all your payments until the refinance has gone through and your balances have been brought down to zero.
#7 - ‘Closing costs’Don't spend your closing costs. Typically, the lender wants to see you with about 1.5 to 3% of the purchase price of the property saved up to cover the closing costs. This money is used to cover the expense of closing on your mortgage, like paying your lawyer for their services. You might think because you shouldn't take out any new credit to buy furniture, you can use this money instead. It's a bad idea. If you don't pay your lawyer, you're not getting your house.
#8 - ‘Your contract’Don't make any changes to your real estate purchase contract. Oftentimes, when you are purchasing a property, there will be things that show up after the fact and you might want to make changes to the contract. Although, it's not a big deal, it can make a difference for financing. So, if your financing is complete and it's a really good idea to check with your lender before you go and make any changes to the purchasing contract.
#9 - ‘For sale’Don't list your property for sale. If you've done a refinance for your property and your goal is to eventually sell it, wait until the funds have been advanced before listing it. Why would a lender lend you money on a mortgage when you're clearly going to sell it right away?
#10 - ‘Advice’Now I’ve actually consulted a mortgage professional for all this information. So, a big shout out to Maureen Young from Dominion Lending for all the help and information. But don't accept any unsolicited mortgage advice from an unlicensed or unqualified individual. Although, this point is least likely to impact the approval of your mortgage status, it might lead you to make some of the mistakes I’ve covered previously.
SummarySo, in a quick summary the only thing you should do while waiting for the advance of your mortgage funds is to continue living your life like you've been living it. Keep going to work and keep paying your bills on time. So, there you have it 10 things you should never do between your accepted offer and mortgage approval and your closing date. Remember, each deal is unique and each mortgage is unique too. So, working with a well-versed and experienced realtor and an amazing mortgage broker like myself and Maureen Young is absolutely key in helping you towards a successful deal.
If this blog has led to more questions, please don't hesitate to reach out. I’m always happy for a coffee and a chat.