Are you looking for a stress-free homebuying experience? Who isn’t? Being mortgage professionals, we’ve seen everything. We thought we would share our insight to make sure your next homebuying experience is a pleasant one.
Without further ado, here are at our three top tips.
Tip #1: Not taking on new debt
With the mortgage stress test a lot higher than it was a year ago, it’s more important than ever to speak with your mortgage broker before taking on new debt. This includes car loans/leases, personal loans and unsecured lines of credit, to name a few. There are a couple main reasons why you might want to do this.
The first is to protect your credit score. If you’re someone with a great credit score in the 800’s, applying for one of these probably won’t have much of an impact. However, if you’re someone with a marginal credit score only slightly above 680, applying for new debt could cause your credit score to drop a few points and you may no longer qualify for the mortgage.
The second reason is to do with mortgage debt ratios. There are two debt ratios lenders qualify you based on: the gross debt service ratio and the total debt service ratio. Taking on new debts affects the second debt ratio.
By taking on new debt, you may no longer qualify for best rates with a lender. In a worse case scenario, you may not qualify for the mortgage at all.
That’s why you should always speak with your mortgage broker first, to avoid a situation like this.
Tip #2: Not quitting your job
This is another big one for a stress-free homebuying experience. Once you have been pre-approved or approved for a mortgage, you don’t want to change your employment situation. The last thing you want to do is quit your job.
Lenders rely on your income to qualify you for the mortgage. However, if you quit your job, you won’t have the needed income to qualify for the mortgage. It’s as simple as that. As such, it’s best to avoid changes to your employment situation while a mortgage application is ongoing.
That being said, sometimes changes to your employment situation are inevitable. If that occurs, you want to let your mortgage broker know right away. If you are starting a new job, some lenders are okay with it as long as they receive at least one paycheque from your new employer. An experienced mortgage broker is worth their weight in gold in situations like that.
Tip #3: Keeping your down payment documents clean
Finally, you want to keep your down payment documents clean.
Lenders typically want to see a 90 day history of your down payment documents. You’re then required to explain any deposits larger than a couple thousand dollars. The lender wants to confirm that the money belongs to you and you aren’t borrowing any money from anyone without disclosing it first.
It’s easiest if you keep your down payment money in the same account. You can run into problems if you move your down payment money all around to different accounts. You can also run into problems if your down payment is scattered all over different accounts.
It’s far better to have your down payment funds in one or two accounts than it is in nine or 10 accounts.
The mortgage homebuying process can be confusing, so it’s important to understand all of the paperwork involved. Be sure to ask your lender any questions that you have so that you can be sure that you’re making the best decision for your financial situation.
If you’re ever unsure about something during the home-buying process, don’t be afraid to ask questions. There are a lot of people involved in the process, and they are all there to help you.
After you’ve gone through the process of getting a mortgage and buying a home, it’s time to enjoy your new place. Congratulations on becoming a homeowner!