Common Mistakes That Can Affect Your Mortgage Financing
There are many factors to consider when applying for a mortgage, and most people are aware that they’ll need an income stream and some money for a down-payment.
However, it can be a little more complicated than that, with lenders and interest rates to consider. Consequently, home seekers can take things for granted, which leads to mistakes.
So, to help you avoid some basic errors that could prove to be costly, Audra Kish- Mortgage Associate has put together a list of the most common mistakes that can affect your mortgage financing.
1. Misunderstanding income requirements.
It’s common for people to think that banks will consider theoretical or potential income when assessing salary. However, lenders will want to be sure that your income is reliable so that you can continue making mortgage payments on time for at least the next five years. Therefore, they will be looking for a guaranteed salary, permanent positions, and long tenure at your job.
If you receive overtime or bonuses in your job, then lenders will allow you to use either a two year average of your income or your guaranteed salary, whichever is higher.
Similarly, those who are self-employed will be looking at a two-year average of the net income claimed on their tax returns (after expenses). The lender also prefers to see earnings increase each year.
If you’re involved in casual labor or if your employer cannot guarantee a set number of hours in writing, then lenders will need to see a two-year history of your employment. Besides, if your position is temporary or you’re still on probation, then you’ll likely have to wait until probation ends or your job is permanent.
Considerations are also made if you happen to be on maternity or parental leave. In that case, many lenders will allow you to use your guaranteed income as long as you can show a letter from your employer to verify the date you’re expected to return.
Other incomes that can be considered part of your assessments include investments, rentals, pension, and disability allowance. Also, child tax benefits and even unemployment income can be included in your application in some situations.
If you’re confused about how much income you can include on your mortgage application, a licensed mortgage professional is your best resource.
2. Not complying with down-payment savings regulations.
It’s essential that any money getting used for a down-payment is saved in a Canadian account, with a ninety-day history of the funds provided.
If you’re saving cash under your mattress (which we don’t recommend!) or outside of Canada, you will have to deposit it into your local bank account and let it sit there for as long as ninety-days before you can use it to buy a house.
Exceptions to the ninety-day rule include funds gifted from an immediate family member, equity drawn from another property you own, or down-payment grants from various organizations. Keep in mind that banking history is required, and any large deposits will need an explanation to comply with Canada’s anti-money laundering legislation.
3. Underestimate the impact debts have on the pre-approval.
Loans with large monthly payments like auto, student fees, and other mortgages can take a big bite out of the amount you can get approved for your new mortgage.
It’s typically easier to qualify for an auto loan than a mortgage. Although, if you’re serious about buying a home, we recommend waiting to buy that new truck until after you purchase your house.
Carrying large balances on credit cards or credit lines can also negatively impact your approval, so try and pay these down as far as you can before you apply.
4. Not monitoring credit effectively.
Many people don’t realize that you will need to have a Canadian credit score on Equifax or Transunion to qualify for a mortgage in most situations. It means having some credit in your name, like a credit card, credit line, or a loan.
If you’re planning to buy a house shortly, it’s wise to monitor your credit (you can do this for free online) and ensure that you have at least two pieces of active credit reporting to the credit agencies each month.
Most lenders will want to see at least two years of good credit history in your name when deciding to lend a mortgage. Your mortgage broker can help get your credit into shape and prepare you for buying a home, so the earlier you start working with us, the better.
5. Not working with a licensed mortgage professional.
We are here to look out for you and always do what’s in your best interest, as we work for you and not for the lenders.
From our first conversation until moving day and beyond, we’re with you every step of the way to ensure you’re informed, prepared, and supported in your home buying journey. The best part is working with us is free, and it’s pretty fun, too.
If you keep these points in mind, it will make your home buying experience a positive one.
So, to avoid these and other mistakes, reach out to the experts at Audra Kish- Mortgage Associate. We serve clients in North Battleford, Prince Albert, Warman, Martensville, Dundurn, Delisle, Humboldt, Rosthern, Rosetown, and Outlook, SK. Our services include refinancing, mortgage renewals, and credit improvement.
For a complete list of our services, please click here. If you have any questions about Mortgages in Saskatoon, SK, we’d love to hear from you. Please contact us here.