You are about to finance a home after you have already been approved for a mortgage. But there are miles before the finish line and the journey can be difficult if you’re not careful. A lender’s pre-approval offer is based on an assessment of your loans, income, debts, and assets. If these things change significantly before final approval, the offer may not be valid.
Here are some things you shouldn’t do before the loan ends:
1. Do not request new credit
Your credit can be withdrawn at any time until the loan is made. Negative changes can change the terms of the agreement or torpedo it completely. The demand for other lines of credit and credit can affect your creditworthiness and the accumulation of debt increases your debt-to-income ratio, a key factor that lenders consider when applying for a mortgage.
2. Don’t miss credit card payments and loans
Keep paying your bills on time. Payment history is one of the most important factors in your credit standing, and late payments to credit accounts (30 days or more) can hurt you.
3. Don’t make big purchases
It can be tempting to buy expensive furniture, appliances, and other household items to prepare for homeownership.
However, paying cash affects your savings and buying back essential purchases increases your debt-to-income ratio and loan usage, or percentage of available credit. Experts recommend keeping credit usage below 30% to maintain good credit.
Generally, wait until the mortgage is taken out to consider large purchases.
4. Don’t change jobs
This may be beyond your control, but it is advisable not to actively change jobs during the loan approval process. Changing careers can mean adjusting your income and adjusting the amount for which you were loaned.
5. Do not make large deposits without creating a paper trail
For a credit insurer, large deposits can indicate recently borrowed money and a higher debt-to-income ratio. For some consumers, this could mean that they are less likely to be eligible for a mortgage.
If a loan officer sees large deposits, usually over $1,000, they should be able to trace their origins. Bank transfers between accounts and payslips are generally fine, but anything that isn’t clear needs to be explained.