Buying a home is one of the top milestones of our lives. Not only do we get to say goodbye to paying someone else’s mortgage with our rent money, but you finally have an asset that belongs to you and will – hopefully – help you build your credit.
If you’re applying for a mortgage or loan to help you purchase your new home, here are some do’s and don’ts to keep in mind. It’s important to ensure you’re making the right decisions now to maximize your loan amount, minimize your interest rate, and ensure that your loan isn’t cancelled prior to registration.
- Do apply for a pre-approval prior to signing an agreement for a home. Yes, you can incorporate a clause that allows you to retain mortgage approval prior to firming up the agreement, however, what will happen when your approval is for much less than the cost of the home? You may also be approved for a higher loan and could have gone for a much better home if that’s what you wanted.
- Do sell off any assets you don’t need. If you own an asset you don’t need or don’t use, such as a camper trailer or second vehicle, it may be in your favour to sell. This will increase the amount of cash used as a downpayment.
- Do try to pay off any outstanding payments ASAP. If you have any outstanding bills that are on your credit report or might appear on it soon, pay them off. These will increase your credit score and in turn, increase your approval rate.
- Do keep an eye on your credit report. Report anything that looks suspicious or isn’t yours.
- Do reach out for advice from an expert. It’s why we are here and we can help keep you from making unnecessary mistakes.
- Don’t change your financial circumstances during the loan process. You’re far more likely to be approved for a higher loan if you’ve been at your job for at least two years. Financial stability is key to obtaining a loan. In addition to that, if you’ve been approved for a loan based on your present circumstances and then you change your job, you may lose your approval and default on your purchase agreement.
- Don’t lie on your loan application. Even a little white lie can turn into a loss of approval.
- Don’t buy or lease a new car. Along with number two above, adding to your debt when you’re trying to take out a major loan such as a mortgage is a definite no-no. If anything, you’ll be asked to pay out the debt you already have with your mortgage funds.
- Don’t change banks. Your current bank knows your situation. Don’t change banks – especially if it’s to leave the bank you’re applying for a mortgage with.
- Don’t use your credit cards if you don’t need them. The trick is to keep your debt as low as possible during this time.
Buying a home and want to know how to ensure your credit score is positively impacted instead of taking a hit? Reach out for a conversation with a member of the LEAF Credit Solutions team today!