I'm a positive thinker and focus on what TO DO, but there are some valid tips on what NOT TO DO when it comes to buying a home, and it is particularly important leading up to closing after the financing condition has already been released.
Your mortgage approval will contain fine print that states if the lender becomes aware that your financial situation has changed and adversely affects your financial situation, etc., they may rescind the approval.
Now, this is absolute worst case scenario and we don't want that to happen.
Between now and closing, follow these tips for a smooth sail!
- DO NOT get yourself a new vehicle without talking to your mortgage professional first. A new truck, car or recreational vehicle payment may put your income to debt ratios out of line and would mean you no longer can financially afford everything without an increase in income. As hard as it may be to resist a new vehicle to go along with a new house (it happens more often than you think that the two go hand in hand), wait until after closing to upgrade your vehicle.
- DO NOT buy furniture or appliances on credit without first checking with your mortgage professional. An increase in credit or line of credit debt is an increase to your financial commitment each month and change your financial situation. Even deferred payment plans count in this scenario, as lenders use 3% of the outstanding balance to determine payments by our formula.
- DO NOT co-sign for a loan for anyone else. Even though the other person is going to be financially responsible in your verbal agreement, the fact that you co-signed is enough for it to count on YOUR credit file. It will show up on your credit report and we must include the entire financial obligation in your liabilities.
- DO NOT stop working! Your employment and income was used on the mortgage application. Wait until after your mortgage closes to take a hiatus from work. Note - maternity/paternity leave is the exception to this given you have a return to work date.
- DO NOT reduce your hours at work. Your income is in direct correlation with the amount of time you work, if you're switching from full-time to part-time this will negatively affect the mortgage amount you qualify for.
- DO NOT change jobs. Wait until after your mortgage closes to switch to a new employer. Typically new employers require you to complete a probationary period and sometimes lenders are not fond of approving mortgages during this time frame because your employer can legally dismiss you for any reason during probation. Depending on your experience, tenure and profession, we can sometimes get an exception on this, but as a general rule of thumb we don't like to see employment changes around the closing date.
- DO NOT transfer money between your accounts unnecessarily. If a lender requests additional bank statements, your large deposits will need to be tracked back through the accounts they originated from. This can create the need for additional paperwork on your end.
- DO NOT make any large deposits to your accounts without having documentation what it was for. For example, you deposit $6000 to your chequing because you sold your prized doll collection. That's great, but be sure to hold onto the receipt you provided to the buyer. Wait until after closing to deposit the $4000 hidden under your mattress! The reason for this is the same as the above for large unexplained transfers.
- DO NOT miss any credit payments, DO NOT be late on any credit payments and DO NOT pay less than the minimum credit payment due. It's very important to pay all of your bills on time. Missing, late or less than the minimum payments can reduce your credit score enough that you no longer qualify for the mortgage.
- DO NOT wait until last minute to transfer your investment for your down payment. Investment transfers can take up to 30 business days to transfer into your account. Although you want to maximize the potential interest earnings on your investment, you also do not want to delay your closing because your funds have not arrived.
- DO NOT rely on using power of attorney (POA). If you or your spouse will not be available for signing, provide that information in advance so that your mortgage professional can make arrangements for signing when you are available. Although use of POA is legal for buying and selling real estate, it has become increasingly more challenging in the last couple of years to purchase homes with POA due to tighter mortgage regulations and lender policies. Ultimately, these policies are there to protect you, albeit somewhat inconvenient at times. Provide information on your availability in advance when at all possible.
- DO NOT go on vacation if you can help it! Buying a home can be stressful, so I understand the desire to have some relaxation time before the big move - but we need to reach you! If you're backpacking in Europe or sunbathing in Barbadoes, it may be challenging to contact you if the need arises. Most closings go smoothly, but lenders sometimes do a final review of the file a week before closing and if they have additional questions, or something needs to be resigned, it's best if you're reachable to avoid any delay in getting the keys.
99.9% of the time closings go smoothly and there's no hiccups before closing. However, despite our best advice sometimes applicants do put themselves in these situations prior to closing and their mortgage approval could be in jeopardy.
And finally, DO make sure you work with a mortgage professional who will be available and guide you through the entire process.
Got questions? I'd love to take a crack at it. Reach out anytime!
Sarah Nixon-Miller, Mortgage Broker
Nixon-Miller Mortgages Inc.
Powered by The Mortgage Group Atlantic Inc.
(902) 225-7077 or toll-free (844) 315-6609
sarahnm@mortgagegroup.com