Time for some Halloween 2021 Mortgage Horror Stories! But the last thing a homebuyer wants is to actually be in one! But you know, on a daily basis, many Canadians face mortgage nightmares when dealing with inexperienced mortgage specialists or brokers. Here are some potential pitfalls to watch out for, so that your mortgage doesn’t come back to haunt you!
The Phantom Pre-Approval
This story occurs far too often, and is frightfully scary. It’s a tale about mere guesses and “phantom pre-approvals”.
The buyers in this story thought they had been “pre-approved.” They went to their bank. How could anything go wrong? Using online calculators, they went through some figures. In 5 minutes, as promised, they completed an app.
When they got their “pre-approval” letter, they said, “Perfect! Let shop!” But little did they know, this letter was no good. For no one asked them to show a pay stub; or produce a bank statement, confirming down-payment. Alas, unbeknownst to them, the letter was… a “phantom pre-approval”.
And yet, off they went hunting, for the home of their dreams. With their realtor, they spent hours, searching and searching. And at last, they found the perfect home. And based on their letter, they made their best offer.
This dream, however, was too good to be true. It would soon prove to be the worst nightmare any homebuyer could face!
They returned to their bank, with their offer on hand. “Sorry, you don’t qualify”, said the bank, as they turned them down! The realtor and buyers, frustrated and defeated, give up in despair. “What went wrong?”, they asked. “We had a pre-approval letter!”
Ah, but the answer they sought, was there all along. Written, clear as day, stood those words, that forever haunt homebuyers unawares. It was always “subject to verification”. Without that, beware, these letters are just: “phantom pre-approvals”.
How This Could Have Been Prevented
By the way, legend has it, these buyers finally got in touch with a mortgage broker who went through the effort of verifying all their information. This ensured they received a fully vetted “pre-approval” letter that would let them shop for home with confidence.
Ok, onto the next story!
Beware Credit Gremlins!
It was early spring. Trees were budding. Birds were singing. And it was an exciting time for this young couple, for they had just bought their very first home! It would be a place to build their dreams. They couldn’t wait for the closing date!
Everything was in place. They even had a mortgage approval, an actual approval. Not one of those “phantom pre-approvals” we hear often about.
But in all this excitement of buying a new home, little gremlins would soon creep into their credit bureau. You see, gremlins are mischievous creatures, wreaking havoc to your credit. A missed payment or two, and they’ll eat at your score.
And so it happened to this young couple, if only they had known. With all the distractions of preparing to move in, they forgot a few things, perhaps not so important to them.
The first gremlin snuck in, when they forgot to pay a phone bill. “It’s not a big deal”, they thought. “We’ll pay it next month”. But their cell phone company did not quite agree. “Missed two payments? To their credit bureau it goes!”
Meanwhile, yet another gremlin was sneaking its way in. It appears ages ago, they cosigned for a loan. It was to help their cousin get that car he so wanted. But he recently lost his job, so payments just stopped. He was too afraid to tell them, hoping he could make it up. Alas, it was too late. The gremlin did its thing. That’s another ding to their credit. A very bad one, indeed. Before they would notice, how much lower could it go?
The gremlins were not done yet. There was one more surprise! This would complete their credit sabotage. This time, the young couple found themselves walking through a big box retail store. Suddenly, a big 75” QLED TV, stood there towering over them. It was majestic, and so crisp. “That would look great in our new entertainment room,” they said to each other. And to sweeten the deal, the price tag read: “Buy now, pay later!”. It was as simple as signing up for a new credit card. “No payments for 6 months!” The offer was too good to resist.
This last purchase was the nail on the coffin. Their credit score tanked; their debt service ratios soared!
You see, leading up to the days, just before closing, banks carry out a last-minute review. Is their credit still good? Their debt still in check? Alas, at the stoke of the 11th hour, their mortgage was refused!
And so, the tale goes that, just because you’re approved, beware of credit gremlins, that are out to get you!
Don’t Let Credit Gremlins Get You!
You know, this is really a nightmare of a situation, and worst yet, it can be completely prevented. When you work with a good mortgage broker, and I mean one that really knows their stuff, they’ll help you all the way to the finish line.
That’s it for today’s episode. I hope you enjoyed the stories! As you can see, when getting a mortgage there can be some nasty surprises, but I’m here to help you avoid them. I’m always ready to “carve out” time for you!