You have successfully been pre-approved for a mortgage loan due to sensibly handling your finances. Jeopardizing your hard work with a few careless activities before closing on your new home would be a mistake. Avoid doing any of these activities until you have the keys to your new home in hand.
1 – Leaving or finding a new job
Providing proof of income was one reason you got pre-approved for your home loan, so losing your job, quitting your current job, or starting another job could affect your final approval. Having a steady source of income and longevity at your job shows your lender that you are stable. Deciding to quit your job erases your consistency with your old job, not to mention it affects your steady source of income. Leaving your current job to start a new one, even if the new job has a higher salary, may seem like the right choice, but it could appear to your lender that you are flighty. Your lender will likely contact your employer before closing, so stay at your current job until you close.
2 – Applying for new credit
It took a lot of effort to get your credit score to a level to be approved by a mortgage lender, and you do not want your credit score to decrease before final loan approval. Your lender pre-approved your mortgage application based on criteria such as your credit score and credit history, so doing anything that might lower your credit score could affect the final approval of your home loan. Applying for a new credit card can be interpreted as having cash flow issues, a red flag for mortgage lenders. A lower your credit score could affect the final interest rate on your mortgage. Make sure you maintain your credit score for when a lender reviews your credit score before closing.
3 – Taking out additional loans
Taking out any additional loans has the same negative impact as applying for new credit. Taking out a car loan, student loan, or personal loan will increase your overall debt. You don’t want to increase your debt before closing on your mortgage loan. Also, don’t be a co-borrower on any loan. As a co-borrower, you are just as liable for the loan debt as the primary applicant.
4 – Making big purchases
Now that you have been pre-approved for a mortgage loan, you are one step closer to closing on your new home. The eagerness to buy new furniture or appliances for your new home will have to wait until you have closed on your home. Your lender pre-approved you based on your debt-to-income ratio, measuring your monthly debt payments as it relates to your incoming money. Making any large purchases on a credit card increases your debt, affecting the terms of your loan. Paying with cash decreases the amount in the bank you have for a down payment. Wait for the mortgage process to end before you make any large purchases.
5 – Falling behind on bills
The time between mortgage pre-approval and closing on your new home is not the time to slack off on paying your bills. Managing monthly expenses can be difficult at times, especially remembering to pay bills on time every month. Avoid overdrafts in your account, paying bills late, and forgetting to pay off debt. Staying on top of your finances will put you in a better position when you close on your new home.
6 – Changing bank accounts
You want to avoid changing bank accounts the same way you want to avoid changing jobs. Before you got pre-approved, you provided pay stubs, bank statements for your checking, savings, investment accounts, and other documents proving your assets. The reason lenders require this information is to confirm that you have the funds to pay the down payment, closing costs and have enough left over to make your upcoming mortgage payment. Lenders will also be looking to see if your assets have been sourced and seasoned. Lenders want to view the source of your funds, verifying that what you provided was not borrowed and expected to be paid back. Lenders want a paper trail of your funds from the past 60-90 days to confirm the validity of your payments. If you decide to change bank accounts between pre-approval and closing, you will have to repeat the lengthy process, delaying your final approval for the mortgage loan.
7 – Making unusual bank deposits or withdrawals
You may believe that large deposits into your bank account will impress the lender, but it causes worry if they do not know the source of the funds. Your pre-approval was based on the current funds in your financial accounts, and any significant deposits or withdrawals on your accounts will need to be explained to your lender. If you received gift payments from family or friends, talk with your lender first before depositing the money. Monetary gifts are allowed for many loan programs, but your lender will inform you of the documentation the giver, and you will need to provide. Similarly, before you attempt to make any large withdrawals of money from your account, notify the lender first of the reason why.
