Can Approved Mortgages Fall Through?

Here’s How to Keep Your Homeownership Dreams on Track

Hey there, future homeowner! You’ve got your mortgage approval in hand and are feeling on top of the world, right? Hold your horses! While getting an approved mortgage is a significant step forward, it’s not your final boarding pass to Homeownershipville. In this article, we’ll explore why an approved mortgage isn’t a done deal and how you can dodge the curveballs that might come your way.

Why Isn’t an Approved Mortgage a Guarantee?

Let’s get down to brass tacks. An approved mortgage is like a definitive thumbs-up from your lender based on a thorough review of your finances and the property you’re purchasing. It’s your lender saying, “We’re ready to commit,” but this final step doesn’t always lead to a home run. Here’s why:

Income Changes: A Slippery Slope

Job jitters can cause significant issues. If you lose your job or switch to a lower-paying one after your mortgage has been approved, the lender might reconsider the approval. Overtime and bonuses can also be problematic. Counting on that extra cash? A reduction here can cause a frown on your lender’s face and jeopardize your approval status. Additionally, if you’re self-employed, inconsistent income might make lenders twitchy, ultimately affecting your approval status.

Credit Score Fluctuations: Keep Your Eyes Peeled

Big purchases can hurt your chances. Have you splurged on a shiny new car recently? Your credit score might not be smiling, and that could impact your final mortgage approval. Similarly, opening new credit lines is risky. New credit accounts are like walking on thin ice; you’ll want to tread carefully to protect your standing with the lender. Even one missed payment might seem small, but it’s a big red flag for lenders, putting your loan status at risk. To avoid this, keep an eye on your credit score through a trusted source like Equifax Canada.

Real-Life Example: A Costly Purchase

Let me share an example of what can go wrong. One of our clients purchased a townhouse and had a mortgage fully approved based on his current debt service ratio. He was told not to make any large purchases or change his employment. However, two weeks before closing, we received a call from the mortgage broker informing us that our client’s mortgage approval could no longer be honored. The reason? Our client had purchased a brand-new car. This new financial commitment disrupted his debt ratios, placing his mortgage approval in jeopardy. The buyer had put down a significant deposit and was at risk of losing it, causing immense stress. Fortunately, my broker was able to secure another mortgage with a different lender. However, due to the altered debt ratios, the new mortgage came with a higher interest rate. This situation underscores how critical it is to avoid large financial changes before closing on a home.

Debt-to-Income Ratio: The Balancing Act

New loans are another potential pitfall. Thinking of taking out a personal loan? This might tip the scales in the wrong direction and affect your mortgage approval. Furthermore, maxing out credit cards is something to avoid. Be mindful of your credit card usage. Keeping those credit cards under control is essential; otherwise, your debt could skyrocket and compromise your final mortgage approval.

Property Appraisal: The Value Vortex

Low appraisals can derail your plans. If your dream home appraises for less than expected, your lender might not play ball, putting your approval in jeopardy.

The Unseen Twists in Your Approved Mortgage Journey

It’s crucial to keep your eyes on the prize and your feet on the ground. Beyond the obvious challenges, some less common pitfalls could affect your mortgage process:

• Lifestyle Changes: Major life events, such as a new baby on the way or planning a big wedding, can impact your financial stability and, consequently, your approval.
• Interest Rate Hikes: If the market takes a turn and rates skyrocket, your affordability may take a hit, affecting your loan approval. Even a slight increase in rates can change the dynamics of your mortgage qualification.
• Policy Changes: Lenders can adjust their policies faster than you can say “mortgage.” Whether it’s a change in lending criteria or a shift in the economy, staying in the loop is crucial to avoid surprises. Regularly check in with your mortgage broker to ensure you remain aligned with current requirements.

FAQs: Clearing the Fog About Approved Mortgages

Q: Can I switch jobs after getting my mortgage approved?

Yes, but proceed with caution. Stability is crucial. Transitioning to a similar or higher-paying job is usually fine, but making a drastic career change could jeopardize your approval. Always consult with your lender before making any significant employment changes during this period.

Q: Should I avoid large purchases during this period?

Definitely! It’s wise to hold off on big-ticket items. By keeping your spending in check, you’ll maintain a healthy credit score and safeguard your mortgage process. Large purchases can significantly impact your debt-to-income ratio, which is a key factor in maintaining your mortgage approval.

Q: How can I ensure my property appraisal goes smoothly?

Doing thorough research is key. Understanding the local market and choosing a property likely to appraise at or above the purchase price will help ensure a smooth appraisal process. It’s also a good idea to work with an experienced real estate agent who understands market values and can guide you toward properties that are less likely to have appraisal issues.

Keeping Your Approved Mortgage Afloat

Now that you’re armed with knowledge, how do you keep your mortgage approval from capsizing? Here’s the game plan:

• Stay Financially Steady: Keep your spending and debts in check. Avoid making any large financial commitments or changing your financial situation before closing. Even small changes can have a big impact on your ability to close the deal.
• Monitor Your Credit: Keep a close eye on your credit score. Any sudden dips can be trouble for your loan. Consider subscribing to a credit monitoring service during this period to catch any potential issues early.
• Communicate with Your Lender: Your lender is your ally. Keeping them in the loop about any significant changes that could affect your approval is key. If you anticipate any changes in your financial situation, inform your lender immediately so they can advise you on the best course of action.

Final Thoughts: The Art of Staying on Track with Your Mortgage Approval

So, can approved mortgages fall through? You bet they can! However, here’s the kicker: being informed, prepared, and prudent can be your shield against these hiccups. It’s not just about getting that mortgage approval; it’s about crossing the finish line with it intact.

Ready to Learn More?

To dive deeper into the mortgage process and ensure you’re fully prepared, check out our guides on Mortgage Approval Basics and Mortgage Financing Simplified. Whether you’re a first-time homebuyer or looking to refine your knowledge, these resources will provide you with the insights you need to navigate the mortgage landscape confidently.

Take the Next Step

Don’t let your mortgage approval slip away! Stay proactive, stay informed, and keep your homeownership dreams on track. If you’re ready to secure your future and make your dream home a reality, start today by reviewing our comprehensive resources and connecting with a trusted mortgage advisor.

Contact Us for personalized advice and guidance through every step of the mortgage process. We’re here to help you navigate any challenges and ensure your homeownership journey is a success.