Every home buyer needs to read this article! You cannot afford to make these mistakes! These warnings are crucial and should be heeded by anyone considering a home purchase.
You have spent the last several weeks scouring the city for your dream home. You wrote an offer and ‘hooray’, it was accepted. You were pre-approved for a loan by your lender a month ago, but understand that your next step is to complete the mortgage application process.
When you initially spoke with your loan officer everything from credit to income looked good. Even though you feel nothing has changed financially, you worry that any teeny tiny discrepancy could result in loan denial.
So how can you avoid the stress of the “unknown deal killer?” Below is a list of pre approval mistakes you can't afford to make once you have spoken with a loan officer and been preapproved for a home loan.
1. No New Credit
- Any new credit inquiries will necessitate an explanation as to whether or not any new credit resulted from the inquiry.
- Any new trade lines could affect your ability to qualify. The new trade line and payment will now need to be counted in your debt to income ratio.
- Running up credit card debt will lead to higher minimum payments and the result could be a reduction in the amount you qualify for or a denial altogether.
2. No Large Purchase
- Don’t purchase a new car
- Don’t purchase new furniture
- Why? Extra Cash is Good, Depleting Your Savings is Bad! Underwriters look very favorably on a borrower with extra cash reserves. Depleting those reserves could affect your preapproval so discuss purchases with your lender once your offer to purchase is accepted.
3. Make Timely Payments
- There is a very strong likelihood that the credit report pulled when issuing your pre approval letter will not be the final credit report pulled during your purchase transaction.
- If you have a debt-to-income ratio greater than 40% then a final credit report will be ran before final loan approval. Any changes, even small ones could be the difference between approval and denial.
- Any missed payments between the time of a prequalification and closing could affect your eligibility due to a reduced credit score.
4. Do Not Change Employment
- Changing jobs could affect your eligibility and require an updated pre approval process
- The amount of time you have been at your current job speaks to your stability
- Changing of pay structure (going from salary or hourly to commission) will affect eligibility. There are many reasons behind this with one being that commissioned employees are treated similar to self-employed borrowers. We will require a 2 year history within that line of work and 2 years tax returns to prove income. Without that, we are more than likely unable to use your new income. The bottom line: Do not make any job alterations without speaking with you lender first!
There are many changes to your financial profile that could affect your loan approval. While the list above cannot possibly encompass all of them, it should act as a general guideline to the top issues we are facing today.
Your best rule of thumb is to just say NO to the temptation of making any financial changes until you have closed on your home. If you are unable to avoid a change that might impact your qualification, notify your lender and your real estate agent immediately. Our goal is to help you eliminate challenges and bypass any potential pitfalls.
Pre Approval Mistakes You Can't Afford to Make was written by Rebekah Radice.
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T: 719.387.1368 | Email: email@example.com | Website: http://rebekahradice.com |CO & NMLS Licensee: LMB100010938 & 288596 | Benchmark Mortgage dba Ark-La-Tek Financial Services, LLC | 12 E. Kiowa |Colorado Springs, CO 80903
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