5 things not to do after mortgage pre-approval
You’re on your way to financing a home once you’re pre-approved for a mortgage. But there are miles to go to the finish line and the ride can get bumpy if you’re not careful.
A pre-approval offer from a lender is based on an assessment of your credit, income, debt, and assets. If these things change significantly before final approval, the offer may not be valid.
Here are the things not to do before the loan closes:
1. Do not apply for new credit
Your credit can be withdrawn at any time until the loan closes. Any negative change could alter the terms of the deal or perhaps torpedo it completely. Applying for more lines of credit and loans can impact your credit rating, and accumulating more debt will increase your debt-to-income ratio, a key factor lenders consider when applying for a mortgage.
2. Don’t miss credit card and loan payments
Keep paying your bills on time. Payment history is one of the most important factors in your credit rating, and late payments on credit accounts – 30 days or more – can hurt.
3. Don’t make big purchases
It can be tempting to start purchasing expensive furniture, appliances, and other household items to prepare for homeownership.
But paying cash will reduce your savings, and charging for substantial purchases will increase your debt-to-income ratio and your credit usage, or the percentage of available credit used. Experts recommend keeping credit usage below 30% to maintain a good credit rating.
As a general rule, wait until your mortgage closes to consider large purchases.
4. Don’t change jobs
It may be out of your control, but it is wise not to actively change jobs during the loan approval process. A career change could mean an income adjustment and revisions to the amount you are allowed to borrow.
5. Don’t make large deposits without creating a paper trail
For a loan underwriter, large deposits can indicate newly borrowed money and a higher debt-to-income ratio. For some consumers, this may mean they are less likely to qualify for a mortgage.
“If a loan officer sees large deposits, usually greater than $ 1,000, she should be able to trace the origin. Anything that is not clear should have an explanation.“
If a loan officer sees large deposits, usually greater than $ 1,000, she should be able to trace the origin. Transfers between accounts and payroll deposits are generally fine, but anything that isn’t clear needs an explanation.
Not sure? Interrogate
Any major change in personal income, assets, or debt can change the terms of your mortgage offer, or even block it altogether. If you’re not sure how an action might affect your claim, ask your loan officer for advice.