15 April 2019

Common life changes that can impact your mortgage pre-approval.

Now that you have your mortgage pre-approval in place, it’s time to start your home search! As exciting as things may be, it is important to keep in mind that your pre-approval was qualified based on your current employment, credit score, debt responsibilities, and down payment. What follows is a list of the most common changes that can occur during the pre-approval period that could impact your qualification status or amount.

1. Changes in your employment or income

Sometimes a great new job or opportunity may present itself while you are searching for a new home. Even if your salary is increasing, changes to your employment can have a significant impact on your pre-approval. For example:

• Is the new job/employer in the same or new industry?

• Is there a probation period?

• Is the pay structure changing (base/bonus/hourly/ part-time/commission)?

• Changing from salaried to self-employed?

All of the above can have a significant impact on your borrowing power. The best advice is to talk to your mortgage agent before you commit to any change.

2. Changes in your expenses

Your pre-approval considers your total monthly expense obligations at the time of application. Adding a new or replacement car loan or lease, increasing credit card balances, and/or increasing your revolving line of credit balances, etc. will change the make up of your monthly expenses. This in turn will have a direct impact on the amount of mortgage you can qualify for when you find the perfect home.

3. Credit Bureau History

Part of securing a mortgage pre-approval is a credit bureau inquiry. While it can vary based on lender and timing, prior to closing on your new home a refreshed credit report may be required. Being diligent with your credit utilization during the pre-approval period (i.e., making payments on time, not going over the approved limit on the credit card / line of credit) will help ensure the credit bureau requirements are met.

4. Down Payment

The down payment amount and source is critical for any mortgage approval. Whether you have a 5% or 30%+ down payment, prior to your mortgage closing, the lender will want to confirm the amounts and source of down payment through a confidential review of bank statements, investment statements, etc. With this in mind, after you have your pre-approval in hand it is important to consider the following:

Savings – keep a paper trail of the activity in your bank account to easily confirm the history of funds on deposit.

Large deposits (i.e., gift from a parent, bonus, etc.) - record of the source from which a large deposit came from.

Changes – your pre-approval was qualified based on a certain amount of down payment. While additional down payment is typically fine, having a reduced down payment can potentially trigger changes in rate, product, and qualification.

5. Planning for additional expenses

If you’re like most people, soon after moving into the home, you’ll be confronted with a long list of needs and wants. Keep this in mind when considering your mortgage structure and total monthly payment. Speak with your mortgage agent about budgeting and ways to maximize cash flow.

6. Keep Your Mortgage Agent and Realtor in the Loop

We recommend that you keep your team in the loop should you have any changes that could impact your mortgage pre-approval. Life happens, and we are always available to explain the potential impact of any changes (positive or negative) and work together to revise your house search strategy and/or pre-approval accordingly.

When you are ready to make an offer, it’s also a good idea to circle back with your Mortgage Agent to review the specific property details and confirm what your payments will look like. While you as a borrower are pre-approved, there are certain factors lenders look at in a property which can also impact the final approval (i.e., condo status certificate, location, condition of property/house, appraised value, etc.)

Even once your mortgage is signed and paperwork is complete, we are always available to provide advice on your closing details and any future financing decisions/needs.

Happy house hunting, and we’re here anytime you need us!

Olena Vus, Mortgage Agent Outline Financial
Tel: (416) 799-1152 

Joanna Lang, Mortgage Agent Outline Financial
Tel: (416) 834-1590