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How to Not Qualify for a Mortgage

Diane Buchanan • Sep 18, 2018

If you have no desire at all to qualify for a mortgage, here are some great ways to make sure you don’t accidentally end up buying a house and taking out a mortgage to do so.

One of the best ways to ensure you won’t qualify for a mortgage is to be unemployed. Yep, banks hate lending money to unemployed people! Okay, so you have a job. Well, that’s okay, you can always unexpectedly quit your job just as you are trying to arrange financing! Even if you are making a lateral move, or taking a better job than the one you have now, that’s cool… any change in employment status while you are looking to get a mortgage will most likely wreck your chances of getting a mortgage for a while. This is because lenders want to see stability; they want to know that you have been in your current position for some time, that you are past probation, and that everything is working out well. By changing jobs right when you are looking to buy a property, you won’t instil the lender with confidence, and they probably won’t give you a mortgage. Mission accomplished.

Don’t wanna buy a house? Well, then it’s best you don’t save any money. Better yet, you should probably borrow as much money on credit as you can. One of the main qualification points on a mortgage is called your debt-service ratio. Simply put, the more money you owe in consumer debt, the less money you will qualify to borrow on a mortgage, because your ratio of income compared to your debt is higher when you owe more money. Consider this permission to go and finance a Harley-Davidson. Do it, right now. Not a big fan of motorcycles? That’s cool; a Ford 150 should do the trick nicely. The key here is to make sure you add as much monthly payment as you can. The bigger the payment, the better. 

But let’s say that unfortunately your debt-service ratios are in line, you have been able to save up the necessary 5% down payment, and you are on your way to buying a house. What do you do? Ugly documentation! A great way to make sure your lender feels uncomfortable is to have really terrible bank statements. Typically when proving your down payment, the lender will require 90 days’ history of your account(s), with your name on the statement, showing that you have accumulated the down payment over time. Want to really mess things up? Make sure there are lots of deposits over $1000 that can’t be substantiated. This will look like money laundering. If that doesn’t work, you can always black out your “personal information.” Just use a black Sharpie and make your bank statements look like a classified FBI document. Lenders hate that!

So you’ve got a great job and lots of money… don’t panic, you can still absolutely wreck your chances of qualifying for a mortgage. Just don’t pay any of your bills on time. Seriously, borrow lots of money, and then stop paying! Boom. Why would any lender want to lend you money when you have a great track record of not paying back any of the money you borrow? Now, if this feels morally wrong, okay, here is an ethical way to wreck your credit. Don’t pay that cell phone bill out of principle. We’ve all been there — roaming charges, extra data charges that the cell company added on your bill… choose not to pay this on principle. This is a great way to sink your chances of getting a mortgage, I mean, how are you supposed to know that some collections (like cell phones) will show up on your credit report?

Last, if you want to make sure you never get financing, insist on buying the worst house in a bad neighbourhood. You see, the property you are looking to buy is very important to the lender. If they lend you the money to buy it and you stop making the payments, they will be forced to repossess and sell it. They are going to make sure they can recoup their initial investment. So, a “handyman special, fixer upper, with lots of potential” is a great option. As everyone knows, those words are code for “a giant dump.” Bonus points if you get those terms written in the MLS listing. Yep, insist on buying something that is falling apart and stick to it; don’t ever consider buying a solid home in a good neighbourhood.

a shot of a run-down house on a hill

So there you have it, if you don’t want a mortgage, no problem. Quit your job, borrow lots of money, wreck your credit, and insist on buying a dump.

However, on the off chance you feel homeownership is right for you, contact me anytime , I can help you put a plan in place to avoid these (and many more) mortgage qualification pitfalls.

DIANE BUCHANAN
Mortgage Broker

LET'S TALK
By Diane Buchanan 27 Mar, 2024
If you’ve been thinking about buying a property, whether that be your first home, next home, forever home, or a home to retire into, the current state of the Canadian economy might have you wondering: Is this really the right time to make a move? There is certainly no shortage of doom and gloom in the news out there. The truth is, that’s a tough question to answer in the best of times. It’s nearly impossible to know for sure what’s going to happen next with the housing market in Canada. It could heat up or it could cool down. So here’s some advice. Instead of basing your buying decision entirely on external market factors, like the economy or housing market, consider looking for the answers internally. When you stop looking at the market to determine your timing to buy a home, and instead examine the personal reasons you have for wanting to buy a home, the picture can become much clearer. Here are some questions to consider. Although they are subjective, they will help bring you clarity. Ask yourself: Does buying a property now put me in a better financial position? Do I make enough money now to afford a new home and maintain my lifestyle? Do I feel confident with my current employment status? Have I saved enough money for a down payment? How long do I plan on living in this new home? Is there any scenario where I might have to sell quickly and potentially lose money? Does buying a property now move me closer to my life goals? Do I really want to buy now or am I just feeling a lot of pressure to just buy something? Am I holding back because I'm scared property prices might drop soon? There’s no doubt that buying a home can be stressful, but it doesn’t have to be. Having a plan in place is the best course of action to help you make good decisions and alleviate that stress. If you’d like to have a conversation to discuss your plans, ask some questions, and map out what buying a home looks like for you, we can address many of the unknowns together. The best place to start is to work through a mortgage pre-approval. There is no cost for this service, you’ll learn exactly what you can qualify for, and it will provide a lot of clarity about your situation. You might decide that it’s best to wait before buying, and that’s just fine. You might find that now’s a perfect time for you to buy! If you'd like to talk, please connect anytime. You’re not in this alone. We can work through everything together.
By Diane Buchanan 20 Mar, 2024
Your credit score and how you manage credit are huge factors in qualifying for a mortgage. If you want the best interest rates and mortgage products available on the market, you want a high credit score. Here are a few things you can do to improve your credit score. Make all your payments on time. Making your payments on time is so important; in fact, it might just be the most important factor in managing your credit. Here's how credit works. When you borrow money from a lender, you agree to make payments with interest on a set schedule until the debt is repaid in full. Good credit is established and maintained by making your payments on time. However, If you break the terms of that schedule by not making your payments, the lender will report the missed payments to the credit reporting agencies, and your credit score suffers. It’s that simple. The more payments you miss, the lower your score will be. If you fail to make payments for over 120 days, the lender will most likely send your debt to be recovered by a collection agency. Collections stay on your report for a long time. So the moment you realize you have missed a payment or as soon as you have the money for it, make the payment. If something prevents you from making a payment, consider contacting the lender directly to let them know what happened and work out an arrangement to make the payment as soon as possible. It's good to note that lenders only report late payments after a payment is 30 days late. If you miss a payment on a Friday and catch it the following Monday, you won't have anything to worry about - except maybe an NSF fee. Now, just because payments don't report until being 30 days late, don’t get comfortable with making late payments; the best advice is to pay your debts on time, as agreed. Stop acquiring new credit. If you already have at least two different trade lines, you shouldn’t acquire new trade lines just for the sake of it. Of course, if you need to borrow money, like to purchase a vehicle to commute to work, go ahead and apply. Just remember: having more credit available to you doesn’t really help your credit score. In fact, each time a potential lender looks at your credit report, it may lower your credit score a little bit. With that said, if you already have two different trade lines and your lender offers you an increase on your limit, take it. A credit card with a $10k limit is better for you than a credit card with a $2k limit because how much you spend compared to your credit card's limit impacts your credit score. This leads us directly into the next point. Keep a reasonable balance. The more credit you use compared to the limit you have, the less creditworthy you appear. It’s better to carry a reasonable balance (15-25% of the card’s limit) and pay it off each month than to max out your credit cards and just make the minimum payments. If you have to spend more than 25% of your card limit, try to remain under 60%. That shows good utilization. Paying down your credit cards every month and carrying a zero balance will undoubtedly improve your credit score. Check your credit report regularly. Did you know that roughly 20% of credit reports have misinformation on them? Mistakes happen all the time. Lenders misreport information, or people with the same names get merged reports. Any number of things could be inaccurate without you knowing about it. You might even have become a victim of fraud or identity theft. By checking your credit regularly, you can stay on top of everything and correct any errors promptly. Both of Canada's credit reporting agencies, Equifax and Transunion, have programs that, for a small fee, will monitor and update you on any changes made to your credit report. Handle collections immediately. When checking your credit report for accuracy, if you happen to find a collection has been registered against you, deal with it immediately. It could be a closed-out cell phone account with a small balance owing, a final utility bill that got missed, unpaid parking tickets, wage garnishments, or spousal support payments. Regardless of what it is, it will harm your credit score if it's registered on your credit report. The best plan of action is to handle any collections or delinquent accounts as soon as possible. Use your credit card. If you have acquired credit cards to build your credit score, but you rarely use them, there is a chance the lender might not report your usage, and that won’t help your credit score. You'll want to make sure that you use your credit at least once every three months. Many people find success using their credit cards for gas and groceries and paying off the outstanding balance each month. There you have it. Regardless of what your credit looks like now, you will continue to increase your credit score if you follow the points outlined above. If you're looking to buy a property and you’d like to work through your credit report in detail, let’s put together a plan to get you qualified for a mortgage. Get in touch anytime; it would be a pleasure to work with you!
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