Pre-approval isn’t cast in stone

Getting pre-approved for a mortgage is a great first step in buying a new home. Meeting with your bank or broker first will help you identify what you can afford and keep your search within your means.

But sometimes even a pre-approved mortgage will fall through.

Your mortgage approval is based on your current income and employment status, debt and credit rating. If any of these change, you run the risk of being declined.

For example, if you purchased a big-ticket item like a car or boat with a large loan, the increased debt load would impact on your chances for keeping that pre-approval.

What if you decided to make that big career change? Chances are, your lender would have concerns about the sudden employment status change and corresponding salary adjustment. If you have career plans in the works, check what effect it may have on your mortgage approval before making the leap.

A credit-rating change – like defaulting on a loan or missing bill payments – also influences whether your mortgage approval will be revoked. Most lenders have strict approval cut-off points based on credit scores, so even a minor change might be enough to trigger a decline. When in doubt, check with one of the two credit-reporting agencies – Equifax or Trans Union. Identity theft also can have a huge effect on your credit history.

Other issues include lender policy changes. A policy change regarding credit score or length of employment, for example, could be applied retroactively and your pre-approved mortgage suddenly won’t be. Or, perhaps the home you’ve chosen is appraised significantly lower than your offer. The lender won’t extend the mortgage to cover this risk.

When in doubt, it’s worth having a chat with your lender before the heartbreak of losing your dream home when your pre-approval falls through.

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