7 Things To Avoid After A Mortgage Preapproval
You met with your broker and have been pre-approved for a mortgage. Way to go! You’re on your way to buying a home. Preapprovals are generally good for 60-120 days, but can depend on the lender. You will likely have to get preapproved again if you don’t buy within the lender’s timelines so it is essential to continue doing the things that allowed you to get preapproved in the first place. Below are seven tips to help keep your financial situation preapproval ready.
1. Don't apply for new credit
Lenders often require the broker to provide another credit check before final approval. If you have been looking for new credit they might make you show that you have not taken on new credit. Your credit score will be affected by new credit so it is wise to not take the chance.
2. Don't make any major purchases
This relates to credit again. If you are carrying a large balance that you were not when you were preapproved, it will affect the size of mortgage you qualify for. This would reduce the loan amount you qualify for and might put the house you want out of reach. If you have cash to make the large purchase, that is fine as long as it does not affect your down payment.
3. Don’t co-sign any loans
If you co-sign for a loan it will affect your credit score even if you have nothing to do with that loan after you sign for it. Even if you have never had to make a payment on the loan, it will show up on your credit bureau. It is a financial obligation and if the primary person on the loan defaults, you must be able to make the payments, therefore lowering the amount of a mortgage you would qualify for.
4. Don’t change jobs
Do your best to not switch jobs after you have been preapproved. With a new job there is likely to be a probationary period where you could be let go at any time. Lenders might not think your new job is very secure even if it is. Of course, there are exceptions but if you can, hold off switching jobs until you purchase a new home.
5. Don’t ignore lender requests
If your mortgage broker recommends something take it seriously. Mortgage brokers know the ins and outs of the industry as this is what we specialize in. For example, a mortgage broker will suggest you do not buy a car, as this is a large expenditure and a common reason why someone would not get approved. When a mortgage broker requests documents, they do so because lenders need to verify information. Lenders need to ensure what is on the application is in fact correct.
6. Stay current on your existing accounts
Pay your bills on time! We need to make sure your credit remains healthy. This includes your overdraft, credit cards and lines of credit. Pulling your credit gives lenders your current financial snapshot so if they are to pull your credit again, you want to display consistency within your finances.
7. Keep a paper trail of your deposits
Make sure you keep a paper trail of your deposits, particularly large ones that are not your typical deposits or related to your income. Lenders must track your down payment and make sure it is coming from a legitimate source and not illegally.
These tips will help keep your financial picture strong but talk to your mortgage broker today to find out more. I want to make sure you are set up so whether you are ready to buy or looking to create a financial plan to get there.