Mistakes to Avoid After Approval

Getting pre-approved for a mortgage is an exciting milestone—it means you’re one big step closer to owning your dream home. But don’t celebrate too soon! Between pre-approval and closing, there are critical do’s and don’ts that can make or break your transaction. Even small financial missteps, like opening a new credit card or making a large purchase, can put your loan at risk. To keep your home purchase on track, here are the most common mistakes to avoid after approval for a successful closing.

Make Large Purchases

Making a large credit purchase equates to increasing debt, which raises a buyer’s debt-to-income ratio. Large cash purchases decrease a buyer’s cash-readiness from the time when they were pre-approved. In both scenarios, the lender may call into question a buyer’s ability to make their mortgage payments.

Quit or Change Your Job

Knowing that a buyer has a stable source of income is important to lenders. Accordingly, it is best for a buyer to wait until after the home loan process is complete before taking steps to change their employment. Not only could changing jobs potentially put their mortgage pre-approval at risk, but it could also delay their settlement, since it takes time to prove a new salary.

Forget to Pay Your Bills

Missing bill payments can be especially harmful to a buyer’s candidacy in the time between getting pre-approved and closing on the home. During pre-approval, lenders are using your ability to pay bills on time to help them paint a picture of your finances and it’s important to keep that picture consistent.

Open a New Line of Credit 

Opening new credit accounts will likely change a buyer’s credit score, which may cause adjustments in their interest rate. Lenders, upon seeing a new line of credit, even a store credit card, may elect to review the buyer’s risk of non-payment.

Pay Off Your Debt 

While most people would think paying off debt is a good thing, if a buyer pays off any significant loans or credit card debt after pre-approval, their lender will want to know where the money came from. The decrease in debt will also have an effect on the buyer’s debt-to-income ratio, which may alter their creditworthiness.

If you found this information helpful and are preparing to purchase a home and don’t currently have an agent representing you, feel free to connect with us so we can help guide you through a smooth and successful home purchasing experience.