7 Mistakes to Avoid after your Mortgage Pre-Approval
Buying a home involves many important steps, though few will matter if you can’t get financing. A loan officer will closely evaluate how large of a mortgage you can afford, and that amount can change up to the day the mortgage note is signed. Because the loan process involves examining factors such as your credit, income, debt and assets, you want to avoid or postpone several common activities that could change these figures while your home loan is being processed.
No.1: Do not apply for new credit
Do not open any new credit cards, do not buy a car (or trade up for a bigger lease), do not get any new student loans. And do not let anyone check your credit scores between now and your closing, unless it is absolutely necessary. Any new accounts can affect your credit scores and your debt-to-income ratio and, potentially, result in loan denial. All lenders have access to credit monitoring services, which will alert them about any new activity on your credit report up until your closing date.
No.2: Do not make any late payments
You must pay all bills on time until you close on your new home and make sure that you don’t have an overdraft on any account at any time. If you have payments automatically billed to a credit card, you should continue that practice. Your loan pre-approval is a snapshot in time and you want to make sure your finances stay as close to that snapshot as possible until the closing date.
No.3: Do not co-sign for others
Co-signing for others will make their new accounts also show up on your credit report. It is considered debt for both people and will influence your debt-to-income ratio and your credit scores, potentially resulting in loan denial.
No.4: Do not pay off any large debts or close any accounts
Even if you pay off your credit card debt, it can hurt you if you close your account or reduce your cash reserves. Please consult us first if you are considering paying off any debt or closing any accounts
No.5: Do not make any large credit purchases
Until you purchase your new home, please avoid making unusually large credit purchases. Some home buyers spend thousands of dollars on furniture and appliances before the loan is approved. These significant purchases can increase your debt-to-income ratio and change your credit scores. Please make these large purchases after you close on the mortgage.
No.6: Do not make large cash deposits or transfers between accounts
If you are planning to receive a gift from a close family member (the only gifts allowed), please consult with your loan officer before depositing the gift money. Please note: cash deposits of any kind are never an acceptable down payment source. Lastly, please minimize transfers between your accounts at different banks, without consulting your loan officer first. Transfers between checking and savings accounts at the same bank are perfectly acceptable.
No.7: Do not switch jobs
This might be out of your control, but it’s wise not to actively switch jobs until you move into your new home. Employment verification will be performed by a bank before granting your loan approval and again 24 hours before the closing on your new loan. Even if it seems like a good move, we would need to verify your new employment and you’ll need one or possibly two paystubs to prove your new salary. This usually delays your closing by 30-45 days. If you must switch jobs, discuss with your loan officer first to see if your approval would still be valid.
If you’re not sure, ask
It’s important to understand that any major changes in personal income, assets or debt can change the terms of your mortgage, or result in loan denial. If you’re not sure how a certain action can affect your application, please ask your loan officer for advice.
Written by: Carlson Mortgage – a St. Louis mortgage broker, providing home loans in the state of Missouri. We are routinely ranked as the #1 mortgage broker in Missouri on Yelp, Google and Zillow. We can be reached at (314) 329-7314 seven days a week. Let us be your source for some of the lowest mortgage interest rates in Missouri on first-time home buyer, conventional, FHA, Veterans (VA), Jumbo and condominium financing. Since 2004, we’ve been providing home loans and mortgage services in St. Louis that are tailored individually to your unique needs and to your financial situation. Our loan officers speak English and Spanish. Call us today to inquire about home loan interest rates, to get pre-approved for a purchase or a refinance mortgage, or if you have any general mortgage lending questions.