Common Mistakes People Make When Buying A Home
Buying a house may seem like a tricky process given that mortgages are complicated to comprehend. Fortunately, if you prepare yourself and increase your knowledge of what to expect, you can easily obtain the funds you need to purchase your dream home.
However, without the right understanding of mortgages, you could be making errors unconsciously that force lenders to decline your application. Some of the biggest mistakes to watch out for are related to new debt, delayed payments, and fluctuating credit scores.
To help you avoid these missteps when purchasing a house, Jennifer McLean Mortgages has listed and explained five of the most common mistakes people make when buying a home.
1. Changing their credit by either opening new credit facilities, or closing them down
Making changes to your credit can reduce your score. Even after receiving a mortgage approval, a lender can check your credit up to your closing date. If your credit score is significantly reduced, this could affect your ability to get the funding you need for your home purchase. For this reason, make sure that you wait until after closing to make any changes to your credit situation.
2. Taking on new debt
When you are in the process of buying a new home, it can be tempting to go out and purchase new furniture and other household items. However, taking on the new debt could reduce your borrowing capacity for a mortgage. The debt you have affects your debt-to-income ratio when you qualify for a mortgage. For this reason, once you’ve been approved for a mortgage, it’s essential to either leave your current debt as it is or reduce it.
3. Moving money around without a proper paper trail
Lenders have become very careful about tracking where your down payment funds come from. Money laundering in Canadian real estate has become a more prevalent issue, and lenders are making sure they can verify the source of all funds being used to pay for your new home. As a borrower, you need to make sure the money for your down payment has been in your Canadian account for at least ninety days. If not, you will need to prove where it has come from, either as a gift from an immediate family member or from a personal or business account. Your lender will require a paper trail of all accounts that have had funds transferred out within that time frame.
4. Changing your job
Sometimes life happens, and you have no choice but to change your job. Unfortunately, this type of behavior can cause a lender to pull their mortgage funding approval. A lender needs to confirm that your income situation is stable. For this, they will need to verify your employment through a letter of employment and recent payslips.
5. Missing payments on loans or other debts
When you make a late payment, the creditor will submit that information to the credit bureau, and this will show up on your credit report, and affect your score. If a lender sees that you are continuously making late payments, they will be reluctant to loan you money for a new home purchase, as they might see you as a credit risk. As a result, you need to ensure that you are making at least the minimum payments on all your bills.
To avoid similar mistakes when applying for a mortgage to buy a house, reach out to Jennifer McLean Mortgages. As an experienced mortgage broker in Calgary, AB, I approach every client interaction with empathy and provide an exceptional client journey through education, communication, and kindness. I aim to understand the challenges my clients face, and I work to help them overcome these obstacles. I currently serve clients across Calgary, Cochrane, Airdrie, Chestermere, Strathmore, Langdon, and Okotoks, Alberta, and I’m happy to help you in any way that I can.