Getting approved for a mortgage in Canada can seem like a complicated process full of potential missteps. But avoiding key mistakes during the mortgage application process can set you up for a smoother approval experience. Use these tips to steer clear of common blunders and get the green light for financing.
Not Checking Your Credit Report and Score in Advance
One of the first things lenders will carefully scrutinize when you apply for any mortgage in Canada is your credit report and current credit score. Before starting the application process, it’s wise to pull your own free credit reports from both Equifax and TransUnion and comb through them for any errors or inaccuracies that may be unfairly dragging your score down. Quickly dispute any mistakes.
In most cases, you need a minimum credit score of 680 to qualify for the best mortgage rates in Canada, although requirements can vary slightly by lender. If your score is lacking, take the necessary time to boost it through credit repair strategies before submitting a mortgage application.
Only Applying for a Mortgage in Canada With a Single Lender
While it may be tempting to simply choose one lender and apply for a mortgage in Canada with them alone, applying with multiple lenders can significantly increase your odds of approval. The additional credit inquiries from mortgage shopping won’t actually hurt your score as long as they are contained within a 45 day period. Take time to shop around with various lenders for the very best mortgage offers.
Having options from multiple lenders also provides a backup plan if your top choice lender denies your mortgage application in Canada. Expand your search and secure multiple pre-approvals.
Not Having All Required Documents Prepared Upfront
To expedite the application processing time of your mortgage in Canada, show up organized and prepared with all the necessary paperwork ready to go. This includes recent pay stubs, tax returns, bank account statements proving funds to cover your down payment and closing costs, IDs, and any other documents the lender requires from their initial checklist.
Being diligent and having everything ready demonstrates to the lender that you are a serious, responsible borrower ready to move forward once approved. Disorganization leads to delays.
Putting Down a Smaller Down Payment Than Possible
While lenders today allow down payments as low as 5% for a mortgage in Canada, putting down less than 20% means you’ll have to pay for mortgage insurance through CMHC. This insurance protects the lender, but does drive up costs for you as the borrower. Save ahead of time and make sure you can put at least 20% down on a mortgage in Canada if possible, even if it means delaying your purchase timeline slightly. A higher down payment signals lower risk to lenders.
Overspending or Taking on New Debts Before Approval
Avoid making any major purchases or taking on additional new debts and payments as you go through the mortgage application process in Canada. Your lender will likely recheck your credit score right before final approval, so any shifts in your existing obligations or debts could cause problems. Keep credit card balances low and continue diligently paying all your bills on time. Hold off on large purchases until after your mortgage is formalized.
Providing Inconsistent Information Across Applications
When applying with multiple lenders for rates, be extra diligent to ensure you are providing up-to-date and factually consistent information on each and every mortgage application in Canada. Any discrepancies in details like income, debts, assets, employment, etc that vary between applications could lead to processing delays or denials.
Neglecting to Read the Fine Print
Never sign on the dotted line for a mortgage agreement in Canada before carefully reviewing all the fine print first. Take time to thoroughly read the provided mortgage terms, interest rate, loan amount, total fees, expenses, penalties, and every other detail in the document. Know exactly what you are committing to and ask questions if anything seems unclear before finalizing.
Failing to Lock In Your Rate Promptly
Interest rates on mortgages in Canada can fluctuate frequently, sometimes even daily. As soon as you are approved, it’s critical to lock in your interest rate and other terms, even if closing day is still weeks or months away. This secures you the rate and terms you were originally quoted by the lender.
Making a Major Purchase Right After Closing
Be very careful about making any major high-dollar purchases that require new financing immediately after your new mortgage in Canada is finalized. Lenders will be monitoring your debts closely during the first few months of your mortgage, and fresh financing could set off red flags. If possible, wait a few months before tapping into your new home equity.
Dodging these common mistakes will help streamline your approval experience when applying for a mortgage in Canada. For personalized advice on qualifying, documents, improving your credit, and navigating the application process, the mortgage specialists at Get Approved Canada can guide you every step of the way. Contact us to get pre-approved today and invest in your future.