Life can bring unexpected changes, and while these shifts are often positive, they can impact your mortgage approval process. Decisions such as a job change, new credit application, or co-signing a loan can affect your financial profile, so it’s essential to know how these life changes may influence your mortgage status. By understanding the potential effects, you can make informed choices to keep your mortgage approval on track and get closer to your dream home.
1. Career Changes and Job Stability
Switching jobs or launching a new career can significantly impact your mortgage approval, as lenders value employment stability to ensure reliable income. A new role, especially one with a probationary period, may introduce uncertainty that can make lenders more cautious.
What to Consider:
If possible, hold off on any job changes until your mortgage process is complete. If a job transition is unavoidable, discuss the potential implications with your mortgage broker and prepare any additional documentation to reassure lenders of your ongoing financial stability.
2. New Credit Applications
Applying for new credit, whether for a credit card, auto loan, or personal loan, can immediately impact your mortgage approval. New credit inquiries and additional debt can temporarily lower your credit score and increase your Total Debt Servicing (TDS) ratio—both of which lenders closely evaluate in Canada.
What to Consider:
Avoid applying for new credit until after your mortgage is finalized. If a new credit application is necessary, consult with your mortgage advisor to understand how it might impact your approval status.
3. Large Purchases on Credit
Financing big purchases, such as a car, boat, or expensive furniture, can also affect your mortgage approval. When you add large purchases to credit, it increases your overall debt load, which raises your TDS ratio. A higher TDS ratio may reduce the amount lenders are willing to loan or, in some cases, impact approval altogether.
What to Consider:
If possible, delay large purchases until after you’ve closed on your mortgage. If the purchase is essential, consider saving for it instead of using credit, which could affect your mortgage eligibility.
4. Co-Signing a Loan for Someone Else
Co-signing a loan for a friend or family member may be a generous gesture, but it can also impact your mortgage approval. As a co-signer, lenders will consider you responsible for the loan, adding it to your TDS ratio and potentially reducing the amount you can borrow for your mortgage. If the primary borrower misses payments, it could damage your credit score, further affecting your mortgage options.
What to Consider:
Carefully weigh the risks of co-signing during the mortgage process. If you’re considering co-signing, consult your mortgage broker to assess any potential impact on your application. Keep in mind that co-signing makes you fully liable if the borrower defaults, which could complicate your mortgage approval.
5. Changes in Savings and Cash Reserves
Lenders like to see healthy cash reserves as part of your financial profile, as they show you can handle unexpected expenses. Using these savings for large expenses during the mortgage approval process can reduce your loan eligibility or delay approval.
What to Consider:
Maintain stable cash reserves until your mortgage process is finalized. If an unexpected expense arises, speak with your mortgage broker to ensure it won’t affect your mortgage application.
6. Marital or Family Changes
Changes like marriage, separation, or adding new dependents can alter your financial profile and impact mortgage approval. For example, adding a partner’s income may boost approval odds, but it can also introduce additional factors, like shared liabilities, that lenders consider as part of the TDS ratio calculation.
What to Consider:
If you anticipate a significant family change, inform your broker. They can help you document your financial status to accommodate these new circumstances and prevent delays in your mortgage approval process.
Life changes are a natural part of the journey, and while they can impact your mortgage approval, understanding their effects on your financial profile helps you avoid setbacks. Always communicate any major changes with your mortgage broker—they’re there to guide you through each step and keep your mortgage process moving smoothly.
If you’re considering a big life decision and are unsure how it might affect your mortgage, don’t hesitate to reach out. As your mortgage advisor, I’m here to provide clarity and support so you can make confident choices.