Just because you’re pre-approved for a loan doesn’t mean you’re guaranteed to get final approval on your loan. When your offer has been accepted and it’s time to begin closing on your loan, your mortgage lender is going to take another detailed look at your credit history, assets, income, and FICO score. You want to make sure you look just as good as you did the day you got pre-approved. How can you do that?
Don’t miss payments
They’re going to see whether you’ve been late or missed any payments on your credit cards or loans since you were pre-approved. Just one 30-day late payment can negatively impact your credit report by many points. Make sure you have all your medical bills, parking tickets, and utility bills up-to-date and paid too!
Don’t apply for new credit
Applying for new credit will lower your credit score and, if you’re approved, increase your debt-to-income ratio – a key factor lenders consider when you apply for a mortgage. These changes could affect the terms of your loan or get it denied altogether.
Don’t change jobs
This might be out of your control, but it’s best to stay with the job you had when you had your loan pre-approval. Switching jobs could signal a change in income, which may impact the amount you’re approved to borrow.
Don’t make any large purchases
You might be tempted to start shopping for furniture or appliances for your new home, but you shouldn’t do it. If you put the charges on your credit card, your debt-to-income ratio will change. And if you pay cash, you’ll have less money for a down payment or as an asset. Hold off on any large purchases until you’ve closed on your new home!
Don’t make big deposits
Any big cash deposits into one of your accounts prior to your mortgage closing looks fishy to an underwriter. They’re trained to spot evidence of borrowers needing to be gifted money for their mortgage – a clear sign the borrower may default. If it’s inevitable that you’ll have a deposit over $1,000, expect to be able to show the origin of the funds to your mortgage company. Transferring money between your accounts is generally fine.
Don’t refinance your loans
Don’t refinance your loans for a lower rate until after your home loan has closed. Refinancing is considered taking out a new line of credit, which isn’t good for someone looking for a mortgage. An established loan you’ve been making regular payments on looks better to mortgage underwriters than a new lower-interest loan you haven’t made many payments on yet.
What SHOULD you do?
Talk to your mortgage expert if you have any question on your current credit score or how your actions will affect your pre-approval. Your local Mann Mortgage branch is dedicated to making your experience both personalized and hassle-free.