Congratulations! You just received your mortgage pre-approval.
Whether you’re still looking at homes or you’ve found the perfect one, your new home is closer than ever before.
So it’s important that you do everything you can to protect your credit rating between today and closing.
Changes in your credit rating can affect mortgage pre-approval. Keep reading to find out about the five pre-approved mistakes to avoid.
Don’t Apply For New Credit
Every day we are hit with multiple credit opportunities, from brick-and-mortar department stores to online retailers, cell phone providers, to car repair.
Businesses want to make it easy for you to spend your money at their establishment and offering easy credit is one of the ways they do that.
Department stores are especially guilty of attempting to lure customers into applying for credit cards at the checkout by offering additional savings, sometimes up to 25%, on the purchase they’re making.
Credit card companies aren’t much better at sending out personalized letters telling customers they’ve already been pre-approved for a gold credit card, often saying “just call a 1-800 number” or “visit a website to activate your pre-approval.”
Now that you’ve been pre-approved for a mortgage loan, however, it’s important that you refrain from taking out any new credit cards, loans, lines of credit, or financing.
Avoid applying for any kind of new credit. Your lender based your mortgage pre-approval on your credit score and overall credit profile at the time of your application. New credit could push your credit out of balance and derail your mortgage pre-approval.
Hold Off On Making Any Kind Of Big Purchases
One of the often-overlooked pre-approved mistakes to avoid is making a big purchase, like jewelry, furniture for your new home, a car to make commuting from your new location easier, a boat, etc.
It’s understandable. You’ve just received mortgage pre-approval, and you’re ready to celebrate after spending countless weeks looking at homes. Now is when you can begin to relax and allow yourself to really see yourself in your new place.
You might even begin making mental notes of things you want to replace, like appliances or renovations you want to implement, like a kitchen overhaul.
Because you’re already in “buying mode,” it can be easy to let momentum sway you into purchasing a new dishwasher or bringing the upstairs bathroom into the 21st century, but it’s important to resist the temptation.
Any significant purchases you make at this time can potentially affect your mortgage pre-approval. This is especially important if you intend to use credit to make the purchase because additional credit could push your debt-to-income ratio (one of the criteria for mortgage pre-approval) out of balance.
If you see something you want in your new home, take photos of the item and record any stock numbers and the store or website where you found them. Then, once your house closes, you can reach out and make the purchase without putting your new home at risk.
Resist The Urge To Pay Off Debt
It may come as a surprise, but eliminating debt is another one of the important pre-approved mistakes to avoid.
Your mortgage pre-approval is based on your whole credit report and history and while paying off debt is generally a good thing, doing it right now could make things more challenging.
FICO’s credit reporting calculation is complex, taking all aspects of your credit history into account when determining your credit score. The tiniest shift in your credit profile could turn into a real headache.
If you still want to take action with your current debt load, reach out to a mortgage lender, like the pre-approval mortgage specialists at River City Mortgage.
By reviewing the details of your specific financial situation, they can help you determine the best actions to take without negatively impacting your mortgage pre-approval.
Avoid Making Unusual Bank Deposits Or Withdrawals
When it comes to keeping your bank accounts in good shape for your mortgage pre-approval, there are two things to keep in mind:
- Bank deposits
- Band withdrawals
Unusual activity in either of these areas can potentially jeopardize your mortgage.
If you make a large deposit into your bank account, anything above $200, be prepared to provide documentation and details about where the money came from. If you receive a cash gift, speak with your mortgage officer before putting the money into your bank account.
Alternatively, large withdrawals could also find your mortgage loan underwriter asking for details to ensure it wasn’t to make a large purchase. To put yourself in the best position, hold off on making significant withdrawals or deposits until after closing.
Stick With Your Current Bank
Part of your mortgage pre-approval process included documents, such as proof of income, employment, and bank statements.
In addition, most mortgage lenders require prospective borrowers to provide savings and checking account statements for at least two months. This helps your lender verify your income and determine whether you have the necessary funds to cover the down payment.
Your bank statements also give your lender important information about your financial assets, including:
- information about where the money came from ( i.e., employment earnings, tax return, sale of the property)
- how long you’ve had the money
If you change banks after you’ve received mortgage pre-approval, you may have to complete the following:
- go through a new mortgage pre-approval process
- wait a minimum timeframe of up to two months after opening your new bank accounts before reapplying for mortgage pre-approval
- provide a letter of explanation from your previous and new bank
- provide a new set of bank statements before you can close on your home
Reach out to the regional pre-approval mortgage loan specialists at River City Mortgage.
Find out how much of a mortgage loan you could qualify for, apply for mortgage pre-approval, or schedule a personal no-charge consultation with one of our experienced loan officers.
We can’t wait to sit down with you and go over all the available mortgage products available and help you figure out the right choice for you and your family.