So you’ve been pre-approved for a home loan; that’s exciting!
Before long, you should be happily moving into your new home and settling in. But before you get too comfortable with the daydreams of your new home, you have to understand that pre-approval isn’t a sealed deal.
In fact, without taking proper precautions, the wrong move at the wrong time could easily put your home loan in jeopardy.
Here, we discuss seven things you need to avoid at all costs when you’re between loan approval and closing –
1. Job Changes
When between loan approval and closing, one of the last things you want to do is change jobs. Offering your proof of income is one of the main reasons you get pre-approval in the first place. Showing a steady and reliable source of income is incredibly important to the process, and losing or changing jobs could hurt your chances of getting into your new home.
2. Applying for New Credit
When it comes to loan approvals, credit is always factored in. Your credit score and history are carefully reviewed by the lender in order to gauge your reliability. The loan approval process is one of the worst times you can apply for a new line of credit as it will change your credit score and may create problems for your loan approval.
3. Making Large Purchases
Many people have made the very unfortunate mistake of getting ahead of the process by making large purchases too soon. Being pre-approved for your home loan is very exciting, and of course, some of your first thoughts may be to buy furniture, appliances, etc. Unfortunately, because your debt-to-income ratio is a factor, making large purchases with a credit card before your loan finalizes can risk your chances of approval.
4. Changing Banks
Because your banking history will be required to qualify for most mortgages, it’s best to keep your banking activity as consistent as possible to avoid raising concerns. The best thing you can do is play it safe by not making any changes until after your approval is finalized.
5. Taking Out a Loan
Taking out a personal loan or even co-signing on a loan for someone else is very risky business when you’re in the home loan approval process. It’s not unheard of for lenders to deny pre-approved loans altogether if your debt-to-income ratio increases by even the smallest percentage they deem unacceptable.
6. Missing Payments
Pay attention to your spending, and be sure to pay your bills on time! Just one late or missing payment could negatively affect your credit score and your chances of approval for your home.
7. Large Deposits
Making large deposits into your bank account will raise questions among your potential lenders. Any large deposits (generally over $1000) will require an explanation and may slow down or even disrupt your approval. Suppose you are to be receiving gifted funds towards your down payment. In that case, it’s important that you discuss this with your lender at the beginning of your loan application to ensure proper documentation and avoid issues later.
Be Patient & Get Approved!
Buying a new home can warrant many changes in your daily life, but the key to getting your final approval and moving into your new home is being patient and making smart decisions along the way.
If you have questions about the home buying process, contact Key Realtors today at 281-454-4500 to speak with one of our experts.