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What Not To Do When Applying For A Mortgage

Sean Cooper

Jul 31, 2019

You’re ready to start looking at properties. Before you do, you get pre-approved for a mortgage. Great idea! While a pre-approval is helpful, it’s important to recognize that it’s not foolproof. There are ways you can actually sabotage your own mortgage pre-approval without even knowing it. Here are three things not to do when applying for a mortgage.

1. Switching jobs

If you’re considering switching jobs, it’s best to wait until after your mortgage is funded. Quitting your job in the middle of a mortgage deal can be disastrous. Not only is your lender using your income at your present job to qualify you for the mortgage, if you’re on probation at your new job, your lender may not allow you to use that income for qualification purposes. If you’ve been in the same industry for many years, you may still be able to use that income, but there’s no guarantee. You could find yourself scrambling for a new lender if they say no. Avoid this stress altogether and don’t quit your job until after your mortgage funds.

2. Making big purchases on your credit card

When you’re buying a home, it can be tempting to make big purchases on your credit card. You may want to buy furniture or a TV set for your new home. Again, it’s best to avoid these big purchases until after your mortgage has been funded. If you do it before, you run two risk: the higher (you’re using more of your available credit limit) could lead to your dropping below the lender’s minimum score, not to mention it could push your debt ratios above the lender’s maximum debt ratios.

If you’re thinking of making a big purchase, speak with your mortgage broker or representative. They can let you know whether you’ll be fine. But don’t just make these big purchases on your own without telling them. That’s when it can lead to problems down the line.

3. Overpaying for a home

In competitive real estate markets like Toronto, bidding wars are common. If you see a home that you really like, it can be tempting to offer “whatever it takes” in order to get it.

Let’s say you get the home. That’s fine and dandy. However, problems can arise when the appraisal takes place. Your home’s appraised value could come in lower than the purchase price. This will leave you scrambling to make up the difference in cash. You may have to go on your hands and knees to relatives and the bank of mom and dad for a cash gift so the deal doesn’t fall apart. Don’t let this happen to you.

When you’re making an offer on a property, make an offer that’s reasonable. You may think the mortgage will only be “this much more,” but if you can’t get the full mortgage financing, you won’t get the home in the first place

Also, unless you’ve included condition of financing, you’ll be required to find a way to make the deal work. You may have to get private or alternative financing. Walking away from the deal is the last thing you want to do. This leaves you open to being sued by the home seller. Not a fun situation indeed. This could have all been avoided by paying a reasonable amount for your home.

The bottom line

Now that you're aware of these three ways you can sabotage your mortgage, hopefully, finding that dream home will be a little easier.

About the Author

is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense.


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