As Halloween approaches, some of us like a good horror story or scary movie. However, none of us would actually like to experience one, especially when it comes to financing a home. Yet on a daily basis, many Canadians face mortgage nightmares when dealing with inexperienced mortgage specialists, agents or brokers. Dim the lights, cue spooky music, and prepare for a few bone-chilling mortgage horror stories…
The Nightmare Before Closing
I have personally seen this far too often. The story goes as follows: a homebuyer first gets pre-approved at a bank. They subsequently spend hours, days and weeks searching for the home of their dreams. And they find one! They experience a sense of euphoria and excitement. But suddenly, out of nowhere, a day before closing the unthinkable happens… the mortgage financing falls-through!
And now everyone is in a panic! The homebuyer made a large deposit and doesn’t want to lose it. Even worse, they don’t want to get sued by the seller! The seller may also be needing the funds to buy another house. Truly a nightmare of a situation!
True story, this happened last week. The realtor reached out to me, and explained the situation. I told them I had a solution and could secure the mortgage by 5pm the following day. Disaster was averted as the fog cleared and stress subsided.
Phantom Pre-Approvals
This next story is just as common, and frightfully scary. It’s a tale about mere hand-shakes and verbal approvals.
This home buyer thought they had been “pre-approved.” They went through the typical process: met with an agent, went through some figures, and calculated their affordability and mortgage payments. “Perfect!”, they thought. Now off to make an offer on their dream home!
But did they actually get a pre-approval or was it just an analysis exercise to see what they could afford? Did they actually receive documentation from a lender or bank? Maybe they just got a “phantom pre-approval”! Their agent really dropped the ball.
And now I get their call. This is super urgent! “We need to find a lender and get a mortgage commitment… and fast!” Banks can take between 45 to 60 days to fund. So the solution is a private bridge loan. Crisis is averted.
Beware of Skeletons in the Closet
Many mortgage lenders routinely carry out a last-minute credit check in the days leading up to closing. Sometimes the mortgage lender also decides to perform additional underwriting. “Skeletons” can be negative actions taken by the borrower, between the time they get pre-approved to closing time. Once these “skeletons” surface, they can adversely affect their approval or get them outright declined by the bank.
Unfortunately, there are many, many mortgage horror stories relating to this. You may likely even know someone this happened to! Oftentimes these situations can be avoided. Some things can’t be avoided, like losing a job, or having your income reduced due to COVID-19.
When it comes to credit, there are many things that can be avoided to ensure your credit score remains as good or better than it was when your loan application was approved.
For example:
DO NOT:
- Increase your credit limits
- Increase your credit card balances
- Make large purchases on credit
- Apply for personal or pay-day loans
- Co-sign for someone else’s loan
- Close credit accounts
DO:
- Pay all your bills on time
- Pay down credit card balances
There are solutions to this problem, depending on how much damage was done. Perhaps it could mean coming up with a larger down-payment. B-lenders can also be an option. And finally, private mortgages are available to help with an urgent closing.
Avoid Inexperienced Agents Like The Plague!
An inexperienced mortgage agent may refer you to a lender that may not have the optimal lending guidelines or flexibility for your circumstances. Moreover, they lack the skill and experience to know how to build a case and convey your story to the underwriter, especially if the application requires lender exceptions (due to credit, debt ratio or income/employment type).
Both these scenarios can potentially get your application declined, costing you time, aggravation and even missed deadlines for the removal of financing conditions. A botched application that is turned down can also hurt your chances of approval with all mainstream lenders.
We’re Always Ready to “Carve Out” Time For You!
Why choose an experienced mortgage broker instead of going directly to the bank? Banks understandably are limited to offering their short list of mortgage products and try to squeeze you into one of their options regardless of whether it’s really the best option for you.
In contrast, we take great pride in providing true thought leadership and being a great source of information. We can help you understand how the evolving lending landscape works, and make you aware of underwriting changes that can impact your application. We strive to learn about your individual circumstances and challenges (this is especially true for self-employed, rental property owners, and individuals with less than perfect credit).
Best of all, we have access to the entire mortgage market. With only one application and credit check, we can search the entire market and match you with the best possible solution. In other words, it’s the right way to shop!
For your next purchase, contact us to help you get the right mortgage the first time. Thereby, avoiding making one of these mortgage horror stories your own!
Happy Halloween!
