Common Pre-Approval Mistakes
Updated: May 5, 2020
There are many reasons why you can hurt your pre-approval. Here are 4 of the most common ones:
#1 Increasing your Debt.
Easily one of the most common is taking on new debt while you are pre-approved shopping for a new home. Taking on a car loan or any new loans or credit products will trigger us and the Lender to re-qualify your file to now include the new loans. In most cases, the new products will jeopardize or kill your pre-approval.
#2 Spending your Down Payment.
We see clients spend part of their down payment savings because they may not realize that 5% of the Property Purchase Price is the minimum down payment requirement in Canada. It is important to know your numbers - Minimum Down Payment Amount, Property Transfer Tax, GST when applicable and Legal Fees. There is no flexibility with these numbers.
#3 Increasing the amount of Credit used on your existing Credit Cards or Lines of Credit.
This technically falls under increasing your debt; however, most people don’t think of it that way, which is wrong. For example, you may have a Line of Credit or Credit Card that has a $10K Limit, and at the time of your pre-approval, you had a $5K balance owing. It is important not to increase the amount owing as it will impact your pre-approval.
#4 Change or quit your Job.
Obvious? Unfortunately not for some. This is a big No-No. Do not quit or change your job. Your Pre-Approval is based on a certain type of Income, whether you are paid a salary, an hourly average, commission or own your own business. Additionally, the length of time you have had the job is taken into consideration at the time of your Pre-Approval and will be looked at again when you go to make an offer on a Property. This must not change. And if you have to change your employment, we urge you to consult with us first. We can review your file again and discuss how a potential employment change will impact your file before you do anything.
Ultimately, we are always here to assist you, so remember, never hesitate to reach out if you have questions about your Pre-Approval.