What to Avoid Before Applying for a Mortgage

Many Canadians look forward to being in the position to buy a new home. The ability to make renovations on a property and build equity in a home with each mortgage payment are only a few reasons many decide to purchase property. The majority of first-time home buyers cannot afford to buy property without working with a mortgage lender, and there may be mistakes made before applying for a mortgage that reduces the likelihood of approval.

Canadian residents can increase their chances of being approved for home mortgage loan. Learn more about the pitfalls that can undermine mortgage applicants today.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.

Credit Score and Credit History

One of the main factors important to Canadian lenders is the applicant's Canadian credit rating or credit score. A low credit score can make it hard for an individual to be approved for a conventional loan. Higher scores are appreciated by lenders who are looking for individuals who can afford to make regular mortgage payments. However, even higher scores can be temporarily lowered. Issues that can lower one credit's score are when an applicant:

• Applies for a credit line only a short period before trying to get approved for a mortgage loan;
• Makes a large purchase, such a vehicle or boat, to be paid off in installments;
• Defaults on a loan; or
• Has an interruption in employment.

All of these situations can directly impact one's credit score and ability to pay off a mortgage loan. Applying for a new credit card will lower one's credit score temporarily. It is also important not to close any credit cards right before submitting a mortgage loan application. Do not make any changes to increase or decrease their credit lines just before working with a lender. Lenders are also concerned about the debt-to-income ratio of an applicant. Large purchases can increase one's debt and alter the ratio, leaving less income accessible for covering mortgage payments. Losing a job or defaulting on any loan may pose a red flag for a lender. Such individuals may not be in a financial position to afford their current lifestyle. Lenders want to work with applicants who have little chance of defaulting on a mortgage loan. Canadians who are interested in buying a home may first want to check their credit score or FICO score with Experian, Trans Union and Equifax.

Canadian Mortgage Fraud

It is important to be truthful about one's actual income. There have been situations wherein a borrower lied about their income to meet certain requirements set forth by a lender. Other factors that may not be accurately represented include letters of employment, property information, and ownership or occupancy details. Applicants may also want to work with an established lender as to avoid those brokers who may want to falsify a mortgage application. Getting approved for a mortgage that one cannot afford does little to serve the borrower or lender. Borrowers are more likely to default and potentially foreclose on a home. Such a route has long-term consequences and will make it harder for an affected individual to become a homeowner in the future.

The Path to Homeownership

Potential Northwest Calgary new home buyers can make efforts to improve their credit score and work with reputable lenders and appraisers. Start by paying down debt and reporting inaccuracies to credit agencies. Applicants that cannot get approved for a conventional loan may want to inquire about special programs that make homeownership more accessible. Speak with a trusted lender for more insights into mortgage loan requirements today.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.