1. Maintain Your Credit Rating. Few people realize that though they have been approved for a mortgage and the mortgage condition is removed, the lender will do a second credit check about two weeks prior to the closing date. If the buyer's credit rating has gone down, then the mortgage company may decide not to forward the funds to close the deal. Buyers are well advised not to do anything that might affect their mortgage credit negatively prior to closing.
2. Don't Let This Happen to You. Some lenders will qualify a buyer for a purchase price that the buyer can afford based on the buyer's stated income, but the lender does not pull a credit report. The buyer goes ahead and negotiates an offer on a house. When he formally applies for the mortgage, the bank obtains a credit bureau report and denies the mortgage based on a less than desirable credit rating.
3. It's About the Paperwork. The Buyer is pre-approved for a mortgage subject to the lender receiving additional paperwork from the Buyer. If the buyer doesn't provide his/her mortgage application in a timely manner and the mortgage does not get approved.
4. Support What You Disclose to the Lender. For instance, a buyer discloses income in the pre-approval process that is less than income stated on the verification of income from the employer. This negates the pre-approved amount.
5. Divorced or Separated? The lender requires a copy of the separation agreement to confirm if there are any support payments that can have a downward effect the amount the buyer can borrow.
6. Both Buyer and House have to Qualify. The buyer as well as the property has to qualify for mortgage approval. The buyer may qualify, but an appraisal is required to confirm that the value is in the property. At times buyers are approved and anxiously remove their mortgage condition before the appraisal. If the appraisal comes in lower than the price paid, this becomes a major legal headache.
At times, CMHC will send an appraiser to report on the house and to justify the amount paid before they give approval on CMHC insured mortgages.
A professional realtor and/or mortgage broker can guide you through potential roadblocks and pitfalls when it comes to a smooth mortgage process.
Eugene Pilato is the broker of record with Century 21 Today Realty in Fort Erie, Ontario.