What NOT TO DO before applying for a mortgage

[MortgageQueen]

Hi Folks,

Recently I've been getting a lot of young folks. . .mainly in 20's to early 30"s applying for mortgages right after they've made a major purchase. While some of them have squeaked by ok, others have not and are devastated they have inadvertantly made a big issue for themselves.

My latest example is a Union worker (construction trade) His credit was so-so but than he got a big increase in income because he switched from apprentice to journeyman. Unfortunately, he and his wife celebrated by going out and buying a few late model/new vehicles. Ouch! Big hit on the credit and drastically increased their debt load.

Please DO NOT assume if you make a lot of money, the banks will give you a mortgage. If you are seeking a mortgage with less than 20% down payment, you must qualify with CMHC/insurer. They have tightened their rules repeatedly.

My suggestion is you talk to a broker PRIOR to begin shopping for a home for good tips on how to maintain/increase your credit score and how to manage your existing debt load to look good for the banks.

Questions are also welcome here and can be answered for everyone's benefit or you can PM me.

[emg]

Mortgage queen thanks so much for sharing your knowledge. Would going on mat leave affect my ability to renew my mortgage. Mortgage is in my name as DH is a student. Thank you in advance

[dougboswell]

Mortgage queen thanks so much for sharing your knowledge. Would going on mat leave affect my ability to renew my mortgage. Mortgage is in my name as DH is a student. Thank you in advance

As long as you have a letter from your employer stating your return date, position, salary and full time you will be OK.

[dougboswell]

Also this thread could include "not what to do after receiving an approval". Never buy any goods and charge them as this increases your debt load and GDS and TDS ratios. If you were borderline before this could cause you to be now over the accepted ratios. Lenders in the past have pulled credit bureaus just before closing. They have the right to cancel the mortgage if you are now over the limits. Pay cash for items or wait until after closing to buy them.

[MortgageQueen]

Mortgage queen thanks so much for sharing your knowledge. Would going on mat leave affect my ability to renew my mortgage. Mortgage is in my name as DH is a student. Thank you in advance

That's a good question emg. If you have existing good credit, that will not likely be a problem. There are also a few Lenders out there that will use your full salary in their calculations (as opposed to the lesser one received during Mat leave)
Also as DB mentioned, you would need a letter from your employer that you will be employed when you return with same salary.

[MortgageQueen]

Also this thread could include "not what to do after receiving an approval". Never buy any goods and charge them as this increases your debt load and GDS and TDS ratios. If you were borderline before this could cause you to be now over the accepted ratios. Lenders in the past have pulled credit bureaus just before closing. They have the right to cancel the mortgage if you are now over the limits. Pay cash for items or wait until after closing to buy them.

Yes, thank-you for bringing that up DB. Often potential homebuyers get very excited about their new home-to-be and start shopping right away for furniture, appliances, maybe even new flooring, etc. in advance of the close of the purchase. Unless your filthy rich and have plenty of room in your debt ratios, BAD idea.
Lenders pull your credit again day before closing, so BEWARE. Wait til you have the house, then move on to the next step. Besides, sometimes it's good to actually live in the place a few weeks to be sure of what and how you want to make changes. . . . so it's a win/win!

[MortgageQueen]

Another thing I thought I'd give a quick mention about, many people very responsibly pay their credit balance off every month BUT, if you are applying for a mortgage and your credit card happens to be near the max when your credit's pulled, it can bring down your score. It's ok to have a balance on your card(s) at time of application (if necessary) but try to keep balance below 60%.

[Frugalbigmama]

I was given great advice when I bought my 1st house. "Live in it for a year before you make changes" I think it was the best advice ever. Let's you realize what your owner costs are etc.

[Dan in Canada]

That's a good point, sounds like common sense but some people may forget about the timing of their purchases