A pre-approval is a great first step in the mortgage process and is definitely something we encourage among home buyers. It gives you an idea of how much you’ll be able to borrow, and shows that you’ve lined up the financing you need to close on a home. However, getting pre-approved doesn’t guarantee you will actually get a loan. If your financial picture changes between the issuance of the pre-approval letter and the formal application is processed, this could lead to a denial of financing. Let’s talk about common mistakes to avoid.
Employment verification happens a few days before closing, and without a guaranteed source of income, you could lose your entire approval altogether. Simply changing jobs can even impact your pre-approval. If your new income has decreased, you may not qualify for the mortgage you originally applied for. Always speak to your Mortgage Loan Officer before you make a change.
If you’re about to close on a house, it’s probably not the best time to get a new car, boat, personal aircraft or other expensive toy. Even furniture or appliances — basically anything you might pay for in installments — is best to delay until after your mortgage is finalized.
Lenders take a close look at credit scores when reviewing loan applications. Missing a payment – especially an existing mortgage payment – can quickly ding your credit score.
Closing is one of the most important parts of the mortgage process. Keep the money you have set aside locked and stored away for closing day.
Your credit can be pulled at any point during the mortgage process up through the date of closing. Opening a new line of credit or closing an existing one can negatively impact your score which, in turn, negatively impacts your chances of getting approved. You want your credit to remain as stable as possible when applying for a mortgage, especially if you’ve already been pre-qualified.
Mortgage lenders are required to document where your funds come from for earnest money deposits and down payments, even if you are using gift funds. Have a clear paper trail showing how money is coming in and out of your bank accounts, and where it’s coming from. Avoid making large cash deposits (or electronic transfers) into your personal bank account that can’t be accounted for. It’s also a good idea to keep personal and business funds in two different accounts if you’re self-employed.
This will create lots of unnecessary paperwork and confuse all parties involved. The transferring of funds may take longer than anticipated and could interfere with your closing date.
Wait until you have moved in to switch banks.
Especially when it’s a new loan, co-signing a loan for another means that the loan is a debt for the borrower and for the co-signer. It will go into the debt-to-income ratio mix. So think twice before helping your child or sibling buy a car, at least until after your purchase closes.
Getting a pre-approval is a great way to get yourself ready to buy a home, but it’s never 100%. By avoiding these mistakes, you’ll be on your way to financing your dream home. Are you ready to get pre-approved? Our Loan Officers are ready to help you through every stage of the home buying process. Get pre-approved today!