You may have good credit, a stable job with favourable income and a down payment saved. However sometimes there may be less-obvious reasons why you may be declined for a mortgage.
Some lenders shy away from certain properties. Some examples are a condo with smaller square footage, a rural property, a mobile home, a property on leased land, and so on.
Although you may feel you pay all your bills on time, sometimes the credit bureau will show a different picture. Your credit score can be lower for a variety of reasons. Some examples are applying for credit often and spending close to or more then your credit limit. Also, cosigning for someone that did not pay their bills on time. This can be a reason you may be declined for a mortgage.
Many lenders and mortgage insurers want to see at least two credit items with strong credit history for at least two years. Many credit items with limits under $2000 will not assist in building your credit score as well, so a credit card with a $500 limit may not be enough.
Depending on your down payment amount, lenders need to see a 30 to 90 day history of your down payment funds. Cash advances, lines of credit, loans from family and friends, gifts from non-immediate family members, cash, etc., are not acceptable forms of down payment. Although you may have the enough funds needed, the lender may not accept the source.
Currently being in a great hourly job or off to a good start with self employment, may not be enough to meet a lenders requirements. For all non-salaried employment like self employment, a lender will use an average of your last two years of taxable income. Also, if you do not have two years tenure in your current employment, that may cause a challenge as well. Probationary periods can also affect a mortgage application. Lenders typically cannot use an applicant’s income while they are on probation.
Sometimes an appraiser may not agree with the price on the offer. This can be seen more often in fast-paced markets and multiple offer situations. A lender will lend on the lower of the purchase price or the appraised value and if there is a difference, a client would need to make that up with a larger down payment.
Being prepared and having a knowledgeable team helping you is your best defence against challenges that can arise when applying for a mortgage and buying a house. Contact me to learn more about reasons you may be declined for a mortgage.
Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.
Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.