When you buy a new home preconstruction, there can be a few years between getting pre-approved for your mortgage and your final closing (when you actually need to qualify for your mortgage). Getting pre-approved is a bit less involved, so if you’re closing is coming up and this is your first time buying, then we think the tips below will be helpful!
Pay off debt
If you bought before shovels even broke ground, you’re likely waiting a few years before moving in. A lot can happen in that time, and your pre-approval was only valid for up to 60 to 120 days (depending on the lender). Perhaps you were hit with unexpected expenses, or you took a trip you really couldn’t afford. Your mortgage approval strongly depends on your current debt. If you know your final closing is coming up soon, then now is the time to start cutting back and throwing any available money at your debt.
Sometimes this is not in your control, but if it is, then it is wise to keep your job while applying for a mortgage. Right before going to the bank and asking for hundreds of thousands of dollars is not a good time to have a change of heart about your current job. The lender needs to see that you’re employed and making enough money to afford the payments. If you quit and tell your lender that you’re looking for a new job, they won’t care what kind of prospects you have.
Have all your paperwork ready
Most lenders will require similar documents, but it’s best to visit the few in which you’re interested to see exactly what they require from you for your application. You’ll likely need your Notice of Assessments for the last two year, pay stubs, and if you own a business you’ll have to provide financials for the last two years, at least.
We understand it may be tempting to go to the bank you’ve been with your entire life, but it’s unwise to not shop around. This is a big commitment and you need to make sure you’re getting the best rate possible. Your lifestyle depends on it. The good thing about most major banks is that if you’re a long-time client of theirs, they’ll likely offer to match any lower rates you find. And if they don’t offer it, don’t be afraid to ask them to match a lower rate if having a mortgage with your family bank makes you feel more comfortable. You’ll definitely need to provide proof that another lender is offering you a lower rate though.
We can’t stress this one enough. Don’t lie about your income. Don’t falsify documents. Don’t write gift letters that aren’t real. Just be honest about your income and debt. If no lenders are willing to approve you, then you can’t afford this new home. If you do end up lying and get away with it, then you’ll find yourself with mortgage payments that you can’t afford. Then you’re in big trouble.
BONUS for condo buyers
If you purchased a new condo unit and your occupancy is coming up - this may not be the final closing. You can’t close on your condo until the building is registered. For example, you will have to move into your new condo before the building is done, which means you’re paying interim occupancy fees to the developer. You could be living like this for three to six months (sometimes longer) before you can close.
Before you jump to conclusions about interim occupancy fees being extra profit for developers, you should know that the fees just cover costs. It’s in the developer’s best interest to complete the building as soon as possible because they make their money when the sales close.
We hope all these tips help you with your mortgage journey!