Robert McLister·
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Top 10 Things Not to Do Before Closing

There’s lots of mortgage no-no’s but here are 10 off the top of our heads…

10. Make large undocumented bank deposits
9.  Fail to disclose you’re on probation with your employer, maternity leave or disability
8.  Close credit accounts with zero balances
7.  Co-sign a mortgage or loan for someone else
6.  Change your job from full-time to part time
5.  Doctor your employment or financial documents
4.  Spend your down payment or closing cost money
3.  Apply for new loans or creditGold top 10 winner
2.  Stop paying your bills on time
1.  Quit your job!

Thanks to the folks at Denzins Financial for the inspiration behind this list.

Robert McLister
Robert McLister is one of Canada’s best-known mortgage experts, a mortgage columnist for The Globe and Mail, and Founder of mortgage broker intelliMortgage Inc., RateSpy.com, a website comparing Canada's best mortgage rates and Mortgage Editor of RATESDOTCA.
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17 Comments

  2. Closing zero-balance credit accounts is a bad idea? I always thought that it was a good idea to close any “potential credit” that you had available and weren’t using so that you looked like less of a risk….?

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  4. To the best of my knowledge, closing zero-balance accounts that you have a history with will negatively impact your credit rating in the short term since you now have less credit history.
    I suppose it could drop you to a lower credit rating which would cause your bank to deny the mortgate at closing.

    Reply

  5. one of the key factors in generating your beacon score is the debt to credit ratio. 30% is ideal, example, $3,000 debt to $10,000 available credit.
    If you were to close those accounts just because there is a zero balance, your credit score will show a lower available credit, thus affecting your credit score. Some lenders will check your credit again just prior to close to see if your financial situation has changed before they release the funds. So if you close those accounts, you might lose your mortgage.
    Read the conditions on your mortgage commitment.

    Reply

  7. A lender makes a decision to give you a mortgage based on the information that you provided. If the information changes, or is different than what is provided, they may change their lending decision.
    If you lose you job, get more debt, change where you are getting your down payment, etc. then the lender may/can/will decide that the risk is higher and pull the funds.

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  8. If you lose your job, you need to notify your lender ASAP. If you are up front about your situation, you are more likely to be able to work something out with the lender based on your situation. A lot of that will depend on the financial institutions lending guidelines from what I’ve heard.

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  9. “Make large undocumented bank deposits”? I’m not sure what “undocumented” refers to, but wouldn’t having more funds on hand at closing be a good thing? Or does it have to do with the mortgageco thinking that the source of those large sums might be other loans that it doesn’t know about?

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  10. Thanks to everyone for the comments!
    Josh, you hit the nail on the head.
    Our contacts at Equifax suggest that eliminating aged accounts with no balance is bad because:
    a) it reduces your active credit history–which Equifax relies on to help judge your repayment track record; and,
    b) it can increase your credit utilization ratio. (another potential negative when calculating your score)
    Cheers,
    Rob

    Reply

  12. Interesting. We close in two weeks, and I just made a large deposit to my account the other day. If anyone asks, I can explain it (I guess if they don’t ask, it qualifies as ‘unexplained’), and I didn’t need it to make the down payment (enough cash was available in the account already to cover that). So hopefully it won’t become a last-minute issue.

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  13. What would happen if my wife is pregnant and we want to apply for a mortgage? Would a bank refuse us or decrease the amount they would lend us just because of the pregnancy and maternity leave?

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  14. If you can explain it then it’s not unexplained. Plus you don’t need the money for a downpayment so don’t worry about it.
    Maternity is OK if your employer agrees to offer you your job back, which is the norm. The problem is when you don’t disclose it when applying.

    Reply

  15. When we got our first mortgage, we received some help from a family member for the down payment. To ensure we qualified for the mortgage, we were told by the mortgage broker to obtain a letter stating that this money was a gift (no need to repay). It makes sense for the banks to be weary as the money could be seen as being another loan to repay which could reduce your likelihood of being able to repay the mortgage.

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  16. If you lose your job before closing the lender will usually cancel your approval. You can get a new job but the lender is not required to reapprove you. You will have to reapply.

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  17. Never knew about the “undocumented bank deposits” … I would think that most people would have some of this, as they gather money for their down payment. (transfer from abroad, gift from family, sale of other assets, etc …)
    However, I understand the worry this would cause to lenders, concerned that the down payment is borrowed.

    Reply

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