It’s the Holidays, and everyone’s spending money!
In reality, most people are using credit to buy Holiday gifts, food and other indulgences, as evidenced by the commercials already talking about the January pain.
If you’re in the market to buy a Toronto-area home or condo in the next few months, take special heed. You should have a pre-approval from a financial institution, and that pre-approval is based on crunching very specific numbers. What many institutions do not mention is that if those numbers change, so does the amount you are pre-approved for.
Some of the metrics included in your pre-approval process involve your debt to income ratio, which means how much money you take home vs. how much you owe every month (and overall) to creditors. This includes credit cards of all types, loans, etc.. If you rack up your credit card bills over the Holidays like many people are tempted to do – I know, the pressure is real! – it will change your ratio.
If you apply for a new loan, or even a couple of department store credit cards, you will show as having more potential debt; your numbers will change. Even the process of applying for credit, loans or even several lending options can ‘ding’ your rating, as too many inquiries can affect your good credit.
If you spend a part of your down payment, your qualification – and possibly mortgage insurance – numbers will change, and if you’re close to the edge of your affordability bracket it could make the difference between affording a mortgage on a property and not qualifying.
In short, if you have a valid and underwritten mortgage pre-approval, treat it like gold. Don’t do anything to jeopardize it, except possibly shopping around for an even better one. There’s always room for that!