5 Mortgage Approval Roadblocks

Published: November 3, 2021

So you’ve decided you’re ready to take the big step to purchase a new home or you want to refinance your existing property. Here are 5 mortgage approval roadblocks to avoid along your mortgage journey.

Whether you are a first-time homebuyer or an experienced buyer/seller, the journey from shopping to closing can be an adventure. At times, it’s an exciting and thrilling adventure. Other times, there are disappointments and even roadblocks along the way. Since we do this daily, our mortgage process will ensure a successful transaction. Here is a quick link to “things not to do before your mortgage closes”.

Imagine this scenario. Your bank or mortgage broker or lawyer calls and says, “there’s a problem”! You have found your dream home, negotiated a fair purchase price, and supplied all the documentation to your bank or lender. You probably assume everything is fine. 

The reality is that your mortgage approval is based on the information you provided the lender at the time of your application. If there have been any changes to your financial situation, the lender can cancel your mortgage approval. To ensure that you don’t encounter any last-minute roadblocks on your home-buying journey, there are five major things you must avoid for a smooth transaction:

1. Changes to Your Employment

Lenders focus heavily on your job status when you need to get a mortgage. Even if your income is the same when switching companies, they will likely demand documents from your new employer. If you’ve switched industries entirely, additional documents will be required. Lenders typically require proof of two years’ worth of overtime/bonus income; this can be tricky after changing jobs! The takeaway is that one should refrain from making significant career shifts until their financing request is approved.

2. Down Payment Source

Getting financing for your dream home can be a tricky business. If something changes right before closing, like the source of your down payment coming from Mom and Dad, as an unexpected gift rather than savings — that could spell disaster when it comes to getting an approval. But don’t worry – as long you let your lender know about any potential surprises beforehand; they should be able to work with you!

3. Existing Debt

A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Since mortgage approval is based on how much you owed on that particular date, it is important not to increase your debt before the deal is finalized. Buying a new car or items for the new home must be postponed until after possession; even if they are “do not pay for 12 months” campaigns because you will need to fulfil those payments, regardless of when they start.

4. Bad Credit

One of the biggest roadblocks to mortgage approvals is credit card payments. When you are in the process of getting financing or waiting to take possession of your home, it is important that your credit score remains positive. If your credit score falls due to late payments, this can cause major issues with your financing. Even if you have a high ratio mortgage in place which requires CMHC insurance, a lower credit score could mean a withdrawal of the insurance and removal of any financing approval.

5. Missing Identity Documents

Before a mortgage is finalized, the lawyer is required to verify your identity documents and see that they match the mortgage documents therefore it is important to use your legal name when you apply for a mortgage. Even if you go by your middle name or a nickname, all legal documents should match.

To help avoid last-minute roadblocks and catastrophes with your mortgage application, be sure to keep in touch with me at all times during the mortgage process. If there are any changes from your initial mortgage application, it is important to advise us well in advance and to run those changes by us to ensure they will not affect your application.

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