When looking to buy a home, the application for a mortgage can be a lengthy process from start to finish. However, during that time, issues can arise and changes in income, employment and credit can bring your application to a screeching halt. Let’s take a look at some bad mortgage behaviour that can prevent your application from being approved in the final stages.
Buying or Leasing a New Car
Whether buying or leasing, a new car is a big ticket item and rarely comes without financial strings attached. Often times a lender will see this additional loan, line of credit or financial obligation and reconsider how much you may be given towards your mortgage, based on what you can afford to pay back with the newly added car payments.
Changes Your Employment
While employment changes do arise during the process of mortgage approval, a big red flag for lenders that may result in a halt in the process is a complete change of industry, or the start-up of a new business. Due to the uncertainty of the new employment and salary, not to mention the high start-up costs if you’re starting your own business, a lender will most likely consider this a valid reason to deny or defer your application until you prove to be in a stable employment position.
Switching From Salary to Commission
The biggest issue with this particular kind of employment change is that there is no stability or guarantee of the amount of income you’re going to be making. While you may aim to reach a specific goal as far as earnings go, a lender may see a commission-based income as too much of a risk when it comes to making your payments and deny your application.
Moving Too Much Money Around
While it isn’t overly common, this issue does still arise every now and then. When a client’s bank records show large sums of money being moved around from one account to another, it acts as a red flag for suspicious behaviour. Whether it be perceived as illegal activity or evasion of other payments, a lender might see this suspicious transferring as a red flag and a cause for dismissal of your application.
Skipping Other Payments
We’ve all had those months when we’ve paid our cellphone bills a little late, or have had to wait on a paycheck in order to fork over the cost of cable. However, a long list of skipped payments, even those still in dispute, can cause big trouble. While any run-ins with a collection agency will surface with your credit check, any missed payments on other expenses, can be cause for denial on your application.
Opening New Credit
It can be very tempting to open a new line of credit, especially with offers like 20% off your first statement or no interest for the first 3 months. However, this should definitely be avoided until after your mortgage has been approved. Taking on a new line of credit can not only alter your credit score, but it can also make a lender leery of what you can afford to take on financially with a mortgage.
Accepting A Cash Gift Without Paperwork
Shockingly enough, many people don’t know that a paper trail is required when accepting a cash gift and using it towards the purchase of a home. Basically, when a lender looks into your financials to determine whether or not you are a viable candidate for a mortgage, they don’t just want to see how much you have in the bank, they also want to see where it came from. For example, if you were to be given a gracious gift of $10,000 from a parent for the purchase of a home, it might indicate you have more money coming in than you do. Therefore, a lender will want to know if that amount of money was a one-shot deal, or if it’s frequent enough to factor into your monthly payments.
Traditionally, undocumented deposits can be a red flag for more than just mortgage brokers. Often banks and even revenue agencies look into suspicious deposits that harbour no explanation, as it can raise skepticism of the validity of the money. When it comes to applying for a mortgage, not only does it raise a red flag as to where to money is coming from, it can also make a lender question how reliable those deposits are in regards to being a steady income towards mortgage payments.
The approval of a mortgage can be a lengthy process, and can involve many aspects to be considered. In order to ensure a smooth transition into approval, it is suggested that you keep an eye out for these bad mortgage behaviours and always consult your mortgage broker when unsure. If you have any questions about applying for a mortgage or the process itself, don’t hesitate to give me call at 705-315-0516. I am always happy to help you better understand all of your mortgage options along with the procedures involved in obtaining an approved mortgage application.