It’s tempting to splurge now and then with a late-night restaurant visit, tickets to your favourite game, or some new home decor pieces. However, these “splurges” can creep up on your wallet. Sure, we can’t be perfect with our spending habits, but it’s important to stay on track with your budget when it comes to affording your monthly mortgage payments. After all, interest rates are increasing, so I want to help you ensure you don’t have any (or multiple) mortgage financing hiccups going forward. In fact, these are my top 5 tips to help you avoid financial distress while searching for your dream home.

1. Get pre-approved for a mortgage to narrow down a price range.

When you get pre-approved for a mortgage, remember that it is not technically approved to buy a home at that cost. You are better off buying a home for less than that, so you have some extra spending money for home improvements and other expenses. And remember, multiple costs come with owning a home. Sometimes unexpectedly, so it is good to have a little wiggle room within your budget.

Make sure you submit accurate documentation of your finances to your mortgage broker when you apply for your pre-approval. This includes your income, bank statements, estimated down payment, monthly obligations, car loans, and so on. They are all factored in to calculate your debt-to-income ratio and verify your credit score. After that step has been completed you will receive a pre-approval certificate from your mortgage broker. Getting pre-approved for a mortgage is vital before you start your house search; it helps ensure you are looking within an attainable price range and not wasting your time.

2. Don’t move money or close bank accounts during your mortgage approval process

Your mortgage broker will require documentation of your banking statements going back several months to prove to the lender that you can pay your bills on time. Moving money around creates a scavenger hunt for your mortgage broker to navigate where the sum originates and proof of each transaction. If you are accepting a sizable gift, like a down payment from a family member, you will need your mortgage broker to document that.

After the mortgage is approved, you should invest your money into a tax-free savings account (TFSA) and a registered retirement savings plan (RRSP). These accounts are great for saving money, especially when you’re working towards long-term goals.

3. Don’t change your job when getting pre-approved for a mortgage.

Earning a consistent income from the same job proves to lenders that you’re not a liability when lending you money. It shows that you always have an income to pay off your mortgage payments. Lenders will review your probationary period cautiously.

You should also be aware that being self-employed can hinder your ability to get pre-approved for a mortgage. But, I have tips for you to help with that too: read on in this article here.

4. Your credit score may come back to haunt you.

Make sure your credit score is at least 680. Having a credit score of 750 is considered excellent. A high credit score indicates to lenders that lending you money for a mortgage is a low-risk investment for them. When your credit score is low, it tells a mortgage lender that you might default on your loan payments. Therefore, they will offer you a higher interest rate – which no one wants to hear! Or worse, they won’t approve of you at all.

Remember, a missed bill can stay on your credit score for up to 6 years. Even a late cell phone payment can make a big difference. Before you get pre-approved for a mortgage, take the time to pay off any existing debt to improve your credit score for a lower mortgage rate.

5. Remember to pay the closing costs!

Remember how I said earlier that multiple costs come with buying a home? Homebuyers must pay a land transfer tax, lawyer fees, title insurance, registration fees, etc. To estimate how much the land transfer tax will be, check out my land transfer tax calculator HERE. Lenders usually recommend saving 1.5% of the purchase price for closing costs, but people will need more in some cases. Check out my closing cost calculator HERE to estimate how much money you should have set aside specifically.

If you’re looking for the best mortgage broker to ensure you get the lowest mortgage rates possible – I’m your guy, Darren Robinson. Whether you’re looking for your first home, second home, or your first cottage, you’ll benefit greatly from working with me. I will ensure that you feel confident going into the approval process and throughout every step afterward. As a financial advisor on the side, I can also aid you in getting set up for success to prevent financial hiccups moving forward as you step into your new adventure as an official homeowner. Feel free to give me a call at 705-315-0516 with any questions or schedule an appointment to meet with me here. I look forward to helping you achieve your home-buying goals on this exciting journey! It’s time to take the first step.