Most buyers know the basic advice:
Pay your bills on time.
Don't carry too much debt.
Maintain a good credit score.
But when you're preparing to buy a home, there are some less obvious details that can become very important.
And sometimes buyers don't discover them until they've already found the property they want.
1. The credit score you see isn't necessarily the whole story
Your credit score is important, but lenders don't make a mortgage decision based on that number alone.
They may also review your overall credit history, existing debts, income, available credit and other financial obligations when assessing your mortgage application.
Your credit score can also change as information in your credit report is updated.
So rather than concentrating only on achieving a particular number, it is important to look at your overall financial position before beginning your home search.
2. Using too much of your available credit may matter — even if you never miss a payment
This is something many buyers don't realize.
Imagine you have a credit card with a $5,000 limit and regularly carry a balance of $4,500.
You may make every minimum payment on time, but you are still using almost all the credit available to you.
The Financial Consumer Agency of Canada recommends trying to use less than 30% of your available credit.
So if you're planning a home purchase, simply saying, "I've never missed a payment," doesn't necessarily tell the whole story.
3. Closing an old credit account isn't always as helpful as it sounds
Before applying for a mortgage, some people decide to "clean up" their finances by closing credit cards they no longer use.
But older accounts may form part of your established credit history.
Closing an account may also reduce your total amount of available credit, which could increase the percentage of available credit you're currently using.
This doesn't mean you should keep every account forever. It means that major changes to your credit profile shortly before applying for a mortgage are worth discussing with your mortgage professional first.
4. Be careful about taking on new debt before buying a home
You're pre-approved for a mortgage.
Then you finance a new vehicle.
Or buy furniture using a new line of credit.
Or open several new credit cards.
Each decision may seem completely separate from your home purchase, but it can change your overall financial picture.
A lender may look at your debts and financial obligations when determining how much mortgage you qualify for.
The safest approach is to avoid making significant credit or debt changes during the home-buying process without first speaking with your mortgage professional.
5. Mortgage pre-approval is not final mortgage approval
This is one of the most important things for buyers to understand.
A pre-approval helps you understand approximately how much a lender may be prepared to lend and can be an important step before beginning your search.
But it isn't a guarantee that the mortgage will ultimately be approved.
The Financial Consumer Agency of Canada specifically notes that mortgage pre-approval does not guarantee final mortgage approval.
The lender still needs to assess the final application and the property being purchased.
That is why your financial position continues to matter after you've received a pre-approval — and even after you've found your home.
6. Check your credit report before you start house hunting
You don't want to discover an error in your credit report after you've already found the home you want to purchase.
The Government of Canada recommends reviewing your credit report before shopping for a mortgage and checking it for errors.
You can access your credit report from Canada's two main credit bureaus, Equifax and TransUnion.
Checking your own credit report does not lower your credit score.
If something is incorrect, dealing with it early gives you more time to address the issue before you're under the pressure of an offer or closing date.
7. The best time to prepare may be months before you buy
There is a common misconception that the home-buying process begins when you start looking at properties.
In reality, good preparation can begin much earlier.
If you're thinking about buying within the next 6–12 months, this can be a good time to:
- review your credit report
- speak with a mortgage professional
- understand your comfortable price range
- review existing debts and monthly obligations
- plan for your down payment and closing costs
- avoid unnecessary new borrowing
Then, when the right property appears, you're making decisions from a much stronger position.
Buying in Toronto or the GTA?
Buying a home involves much more than finding the right property.
Financing, conditions, deposits, inspections, closing costs, negotiations and timing all need to work together.
I've created a complimentary Home Buyer's Guide that explains the buying process step by step and can help you prepare before you begin your search.
→ Download My Home Buyer's Guide https://www.allapoltavski.com/buyers-guide
If you're considering buying in Toronto or the GTA and would like to understand how to approach your search, I'm always happy to discuss your situation.