Overlooked Influences on Mortgage Approval

It's well known that your credit score, your down payment amount, your income and debt-to-income ratio are key factors in determining the amount of mortgage you'll be approved for - or if you're approved at all. But there are many other factors that can affect your approval in some situations.

It's generally a bad idea to change jobs right before applying for a mortgage, or while you're in the process before you've closed. Even if the job is better paying and higher level, lenders may still view it negatively if you're still in the first few months at the job, since you can be in a probation period. If you must switch jobs, be sure to be upfront with your lender, since if they find out later they can pull your approval. You may need to go through the qualification process again and could be approved for a different amount.

Definitely don't quit your job without another lined up immediately. That will instantly reduce your buying power and likely result in your mortgage approval being pulled. The more stable your recent job history looks, the better.

On a related note, if you're self-employed, it may be more difficult to get approved for the maximum mortgage at the best rates. It's worth talking to a lender or mortgage broker that has specific experience with the self-employed to make sure you get the best deal. You may want to make a larger down payment, and may need to work with a lender other than the biggest banks.

Your chances are best if your income is relatively stable and high, and you can prove it with two years of tax returns. Contracts and other proof that your business is booked for the immediate future is also useful. Again, the more stable your income history looks, the better.

Similar to the self-employed, if you're living off your retirement accounts, have been on leave, are laid off seasonally in your industry, or otherwise have variable or lower income for any reason, you may need to provide more documentation and should work with someone experienced in your situation to get the best deal.

Your lender will need to see at least two months of statements for all your accounts. Positive signs include having a healthy balance in your checking and savings, and paying off your credit cards in full each month. Negative signs include spending more than you earn, carrying a high load of debt and/or obligations (e.g. child support), maxing out your credit cards, and overdue payments. Be ready to explain any large deposits or withdrawals, and try to avoid making them while you're in the approval process before you close.

Try to avoid applying for a new credit card, auto loan, line of credit, or any other loan while you're in the mortgage approval process. Taking on new debt will make your debt-to-income ratio less optimal, and even applying for credit you don't use will ding your credit score for a little while. Both of those affect your mortgage approval.

If you already own multiple properties, this can also affect your ability to get approved for another mortgage.

If you're looking to buy a home as a non-citizen or non-resident, be sure to talk to a real estate agent and a lender experienced in this situation.

If you are in the middle of a separation or divorce, your lender may require additional documentation. Your lender should also know about things that affect your finances like if you're in the process of receiving an inheritance or dividing up an estate.

There are many factors related to the home that can make getting a mortgage to buy it more difficult, or block it altogether. These include special factors like agricultural or business activities on the property, very rural or leisure/recreational properties, unique properties like tiny homes, and any property or title issues (pending lawsuits, uninhabitable condition, etc). If you're interested in unique or distressed properties, be sure to discuss this with your lender.