Five Things to Avoid After You're Pre-approved
Getting pre-approved is a great first step in buying a new home. To stay on track, it’s important to protect your pre-approval status. Specifically, this means maintaining similar finances as when you applied for your home loan. Changes that you may not think twice about may impact your pre-approval. Below are some common events that can put your home loan approval in jeopardy.
1. Income Changes
Typically you are pre-approved based on your two-year employment history. Maintaining your job status now is important. Now may not be the best time to quit your job and start a business. If possible, also avoid changing jobs. Even if you’re looking at a pay bump with a new company, check in with your mortgage loan officer before making a career change.
2. Increased Spending
A factor in your home loan pre-approval is your debt-to-income ratio. Increasing your debt by taking on a car loan or buying big-ticket items on a credit card may change that ratio.
3. Missing Payments or Making Late Payments
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. So it’s really important to make credit card, car loan, rent, utilities and all types of payments on time.
4. Large Cash Deposits
At first glance, this doesn’t make sense to many borrowers. But a big influx of cash is also something lenders monitor. Many types of mortgage loans do allow down payment gifts. But before accepting someone’s generosity, be sure to talk to your mortgage loan officer. They can verify your loan’s guidelines and tell you what confirmation paperwork you’ll need to provide.
5. Underestimating Additional Expenses
Moving costs, new furniture and home improvements can all quickly add up. It’s important to include these expenses in your monthly budget. That way, you’ll know how much you can realistically pay for a new home. Keep this in mind as you negotiate that final price. But before taking on these expenses, see tip number two.
Getting pre-approved is a smart move in the home-buying process. So, too, is protecting your loan qualification status. Both can help you get the home of your dreams.