Homebuyers: Avoid These Common Mortgage Pitfalls

Anita Groves • August 21, 2018

A home is the largest purchase most people will make in their lives.

That should reinforce the importance of planning ahead, doing your research, relying on the advice of experts and not rushing through the process.

With nearly 700,000 homes purchased in Canada each year, there’s no shortage of anecdotes about the issues and surprises that can arise.

While a mortgage broker can help you avoid many of the pitfalls commonly encountered during the home buying process, it’s still important to be informed even before you start looking for that perfect home. Here are just a few examples:

1. Not checking your credit report before applying for a mortgage

Put simply, not knowing your credit score prior to applying for a mortgage is akin to not brushing your teeth before visiting the dentist.

Your credit score can have a huge impact on the best rate you’ll be able to secure. For example, some lenders will offer a borrower with a 640 credit score rates that are a full 0.25% worse than someone with a score of 750, as we’ve written about previously on these pages. For conventional mortgages (those with down payments of less than 20%), the ideal target score is around 720.

You don’t want to discover your credit score is sub-par in the middle of a mortgage application. Knowing this information beforehand gives you time to improve your score, or address any errors that may appear on your report. You can easily check your score through Equifax or TransUnion.

Anyone with a credit score less than 680 (the minimum credit score to get the best rates) should be prepared to pony up for a higher interest rate and will likely qualify for a smaller mortgage.

2. Thinking it’s all about the rate

Let’s be honest, who doesn’t want the cheapest mortgage rate possible? And indeed it is important to find the best deal that meets your needs. After all, a few percentage points can make a not-insignificant difference to your interest costs over your mortgage term.

But don’t be too quick to jump at the cheapest rate without making sure it has all of the features you need/want, and that it doesn’t stick you with higher-than-normal penalties should you need to break your mortgage early. Some people are OK with a large penalty if it saves them money upfront on the rate. Just remember that penalties on certain “no-frills” mortgages can end up costing many thousands of dollars, nullifying any rate savings.

3. Not understanding the importance of the down payment

Many first-time buyers see a down payment as a big, almost-insurmountable obstacle to home ownership, particularly in regions where prices have skyrocketed into the stratosphere.

But when you get into the nitty-gritty of it all, there are many more considerations beyond simply coming up with the money.

Things to consider:

How big of a down payment will you/can you make? Of course you must meet the federally mandated minimum down payment: 5% for all mortgages up to $500,000, and 10% on any portion above $500,000 up to $1 million (CMHC-insured mortgage loans are only available on properties valued under $1 million). It goes without saying that as you increase the size of the down payment, you reduce the amount of interest over the lifetime of the mortgage. But you also reduce the size of the CMHC mortgage insurance premium, which runs from 0.60% on loan-to-values up to 65%, all the way up to 4% for loan-to-values of 95% (i.e. 5% down). CMHC says the average down payment in 2016 was 8%, while the average CMHC-insured loan was $245,000. Based on those figures, the average premium was $9,016. Remember, this premium is normally rolled into the mortgage, and gets paid off (with interest) over the life of the mortgage.
The source of your down payment funds. According to Mortgage Professionals Canada, about 10% of first-time buyers use the federal government’s Home Buyer’s Plan to withdraw up to $25,000 tax free from their Registered Retirement Savings Plan (RRSP). This can be a great tool for supplementing a down payment, so long as you’re aware of the rules and the payback requirements.
Transferring the funds. No matter where your down payment funds are coming from (savings, investments, RRSP, proceeds from a prior sale), be sure to leave yourself plenty of time for the funds to clear and for a certified or cashier’s cheque to be produced before the closing. It’s easy to underestimate the time it may take for wire transfers to finalize, so be sure to confirm with your bank or financial institution in the event of a tight deadline.

4. Not setting (and sticking to) a budget

You’re probably thinking, “but budgets can be boring and tedious.” This is not entirely incorrect, but on the other hand a budget paints a clear picture of your financial situation and lays the framework for ensuring you can afford all of the hidden (and not so hidden) costs associated with buying a home—not to mention all of the costs that follow after the closing.

It’s important to plan for both the short and long term. Short-term costs include everything from:

Land transfer taxes
Legal fees
Home inspection/appraisal fees
Down payment (this is kind of a big one)
Mortgage insurance (remember, the provincial tax on your insurance premium can’t be rolled into the mortgage like the premium itself, so expect this hefty expense at closing time)

Then there are the ongoing costs of home ownership. Previous owners will know what to expect, but first-time buyers may be caught off guard with sudden expenses after moving in, such as:

Appliances and furniture
Condo fees/Property taxes/Property insurance
Utility costs
Renovations/repairs (furnace replacement, new shingles, etc.)
And everything else, down to tools, and yes, even a dehumidifier. These expenses can add up

As for long-term planning—and this applies especially to today’s buyers—just because you scored a great rate for your purchase, be prepared for the possibility that rates will rise and that you may need to renew into a higher rate in the future.

For every 25 bps or rate increases, adjustable-rate holders can expect to pay approximately $25 more in interest each month based on a $200,000 mortgage.

5. Not Shopping Around

Whether you plan to find your own mortgage or enlist the help of a broker, it’s still important to shop around in both cases.

Most people don’t buy the first car they test drive. They give themselves adequate time to research and compare their options. So why would a purchase worth many times the cost of your vehicle be any different?

If you have questions about any of these issues, or about the mortgage application process in general, I’d love to discuss it with you. Please don’t hesitate to contact me anytime!

This article was written by Steve Huebl from Canadian Mortgage Trends. It was originally published here on July 21,2017.

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Anita Groves

PROFESSIONAL MORTGAGE BROKER

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Everything You Should Know Before Buying a Home

By Anita Groves • December 3, 2025

Thinking About Buying a Home? Here’s What to Know Before You Start Whether you're buying your very first home or preparing for your next move, the process can feel overwhelming—especially with so many unknowns. But it doesn’t have to be. With the right guidance and preparation, you can approach your home purchase with clarity and confidence. This article will walk you through a high-level overview of what lenders look for and what you’ll need to consider in the early stages of buying a home. Once you’re ready to move forward with a pre-approval, we’ll dive into the details together. 1. Are You Credit-Ready? One of the first things a lender will evaluate is your credit history. Your credit profile helps determine your risk level—and whether you're likely to repay your mortgage as agreed. To be considered “established,” you’ll need: At least two active credit accounts (like credit cards, loans, or lines of credit) Each with a minimum limit of $2,500 Reporting for at least two years Just as important: your repayment history. Make all your payments on time, every time. A missed payment won’t usually impact your credit unless you’re 30 days or more past due—but even one slip can lower your score. 2. Is Your Income Reliable? Lenders are trusting you with hundreds of thousands of dollars, so they want to be confident that your income is stable enough to support regular mortgage payments. Salaried employees in permanent positions generally have the easiest time qualifying. If you’re self-employed, or your income includes commission, overtime, or bonuses, expect to provide at least two years’ worth of income documentation. The more predictable your income, the easier it is to qualify. 3. What’s Your Down Payment Plan? Every mortgage requires some amount of money upfront. In Canada, the minimum down payment is: 5% on the first $500,000 of the purchase price 10% on the portion above $500,000 20% for homes over $1 million You’ll also need to show proof of at least 1.5% of the purchase price for closing costs (think legal fees, appraisals, and taxes). The best source of a down payment is your own savings, supported by a 90-day history in your bank account. But gifted funds from immediate family and proceeds from a property sale are also acceptable. 4. How Much Can You Actually Afford? There’s a big difference between what you feel you can afford and what you can prove you can afford. Lenders base your approval on verifiable documentation—not assumptions. Your approval amount depends on a variety of factors, including: Income and employment history Existing debts Credit score Down payment amount Property taxes and heating costs for the home All of these factors are used to calculate your debt service ratios—a key indicator of whether your mortgage is affordable. Start Early, Plan Smart Even if you’re months (or more) away from buying, the best time to start planning is now. When you work with an independent mortgage professional, you get access to expert advice at no cost to you. We can: Review your credit profile Help you understand how lenders view your income Guide your down payment planning Determine how much you can qualify to borrow Build a roadmap if your finances need some fine-tuning If you're ready to start mapping out your home buying plan or want to know where you stand today, let’s talk. It would be a pleasure to help you get mortgage-ready.

Collections Can Prevent Mortgage Financing

By Anita Groves • November 26, 2025

A question that comes up from time to time when discussing mortgage financing is, “If I have collections showing on my credit bureau, will that impact my ability to get a mortgage?” The answer might have a broader implication than what you might think; let's spend a little time discussing it. Collections accounts are reported on your credit bureau when you have a debt that hasn’t been paid as agreed. Now, regardless of the reason for the collection; the collection is a result of delinquency, it’s an account you didn’t realize was in collections, or even if it’s a choice not to pay something because of moral reasons, all open collections will negatively impact your ability to secure new mortgage financing. Delinquency If you’re really late on paying on a loan, credit card, line of credit, or mortgage, and the lender has sent that account to collections, as they consider it a bad debt, this will certainly impact your ability to get new mortgage financing. Look at it this way, why would any lender want to extend new credit to you when you have a known history of not paying your existing debts as agreed? If you happen to be late on your payments and the collection agencies are calling, the best plan would be to deal with the issue head-on. Settle the debts as quickly as possible and work towards establishing your credit. Very few (if any) lenders will even consider your mortgage application with open collections showing on your credit report. If you’re unaware of bad debts It happens a lot more than you’d think; people applying for a mortgage are completely unaware that they have delinquent accounts on their credit report. A common reason for this is that collection agencies are hired simply because the lender can’t reach someone. Here’s an example. Let’s say you’re moving from one province to another for work, you pay the outstanding balance on your utility accounts, change your phone number, and make the move. And while you think you’ve paid the final amount owing, they read your meter, and there is $32 outstanding on your bill. As the utility company has no way of tracking you down, they send that amount to an agency that registers it on your credit report. You don't know any of this has happened and certainly would have paid the amount had you known it was due. Alternatively, with over 20% of credit reports containing some level of inaccuracy, mistakes happen. If you’ve had collections in the past, there’s a chance they might be reporting inaccurately, even if it's been paid out. So as far as your mortgage is concerned, it really doesn’t matter if the collection is a reporting error or a valid collection that you weren’t aware of. If it’s on your credit report, it’s your responsibility to prove it’s been remediated. Most lenders will accept documentation proving the account has been paid and won’t require those changes to reflect on your credit report before proceeding with a mortgage application. So how do you know if you’ve got mistakes on your credit report? Well, you can either access your credit reports on your own or talk with an independent mortgage advisor to put together a mortgage preapproval. The preapproval process will uncover any issues holding you back. If there are any collections on your bureau, you can implement a plan to fix the problem before applying for a mortgage. Moral Collections What if you have purposefully chosen not to pay a collection, fine, bill, or debt for moral reasons? Or what if that account is sitting as an unpaid collection on your credit report because you dispute the subject matter? Here are a few examples. A disputed phone or utility bill Unpaid alimony or child support Unpaid collections for traffic tickets Unpaid collections for COVID-19 fines The truth is, lenders don’t care what the collection is for; they just want to see that you’ve dealt with it. They will be reluctant to extend new mortgage financing while you have an active collection reporting on your bureau. So if you decide to take a moral stand on not paying a collection, please know that you run the risk of having that moral decision impact your ability to secure a mortgage in the future. If you have any questions about this or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you!