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You have successfully been pre-approved for a mortgage loan due to sensibly handling your finances. It would be a mistake to put your hard work at risk with a few irresponsible actions right before closing on your new house. Avoid doing any of these activities until you have the keys to your new home in hand.
Congratulations! Getting pre-approved for a mortgage is the first step towards becoming a homeowner. However, before you can formally declare yourself a homeowner, there are still a few obstacles to clear, so hold off on popping the bubbly just yet. A crucial point to keep in mind during this period is to abstain from any actions that might compromise your chances of receiving final loan approval.
Here are 13 things you should never do while waiting for your mortgage approval:
- Quit or switch your job. This is a big no-no, as lenders want to see a steady source of income. Changing jobs could raise red flags about your financial stability, making it harder to get approved for a loan.
- Buy a car. Taking on new debt, like a car loan, can increase your debt-to-income ratio, making you a riskier borrower in the eyes of lenders. Hold off on that new set of wheels until after your mortgage is approved.
- Go crazy with your credit cards. Maxing out your credit cards can hurt your credit score and make you look like a less responsible borrower. Keep your spending in check and avoid opening any new credit accounts.
- Change banks. This can disrupt your banking history, which lenders rely on to assess your financial responsibility. Stick with your current bank until after you close on your new home.
- Apply for any new credit cards. As mentioned earlier, new credit inquiries can negatively impact your credit score. Wait until after your mortgage is approved before applying for any new credit cards.
- Ignore questions from your lender. Be responsive and provide the information your lender needs promptly. Ignoring their requests can delay the loan process or even lead to denial.
- Co-sign on any loans. Even if you’re not the primary borrower, co-signing on a loan makes you responsible for the debt. This can hurt your chances of getting approved for your own mortgage.
- Let anyone run a credit check. Too many credit checks in a short period can lower your credit score. Avoid letting anyone run your credit while you’re waiting for your mortgage approval.
- Miss any payments. This is a big red flag for lenders and can lead to denial. Make sure you’re on top of all your payments, including rent, utilities, and credit card bills.
- Close any accounts. Closing credit accounts can shorten your credit history and hurt your credit score. Wait until after your mortgage is approved before closing any accounts.
- Make large deposits to your bank accounts. This can raise red flags for lenders, who may want to know the source of the funds. If you’re receiving a large gift, be sure to document it and inform your lender beforehand.
- Make payments on old collections accounts. While it’s generally a good idea to pay off old debts, doing so before your mortgage is approved can refresh them on your credit report and hurt your credit score. Wait until after closing to tackle those old debts.
- Be afraid to ask questions. Don’t hesitate to ask your loan officer any questions you have about the mortgage process. They’re there to help you understand and navigate the process.
By following these tips, you can increase your chances of getting your mortgage approved and securing your dream home. Remember, patience is key during this time. Avoid making any major financial decisions or lifestyle changes that could jeopardize your loan approval. With careful planning and a little bit of patience, you’ll be celebrating in your new home before you know it!
1 – Leaving or finding a new job
You were pre-approved for your home loan in part due to your ability to provide proof of income; therefore, termination of employment, change of employment status, or start a new job could impact your final approval. Having a steady source of income and longevity at your job shows your lender that you are stable. Choosing to leave your job destroys your consistency from your previous position and has an impact on your reliable source of income. Even though starting a new job may seem like the right decision, leaving your current one could give the impression to your lender that you are flighty. Your lender will likely contact your employer before closing, so stay at your current job until you close.
4 – Making big purchases
Having received pre-approval for a mortgage loan, you are now just a step away from closing on your new residence. You will have to wait until after the closing on your house to fulfill your desire to purchase new appliances or furniture for your new residence. Based on your debt-to-income ratio—a calculation that compares your monthly debt payments to your income—your lender pre-approved you. Making any large purchases on a credit card increases your debt, affecting the terms of your loan. Paying with cash decreases the amount in the bank you have for a down payment. Wait for the mortgage process to end before you make any large purchases.
What NOT to tell your LENDER when applying for a MORTGAGE LOAN
FAQ
What negatively affects mortgage approval?
Can I use my credit card while waiting for a mortgage?
What should you not do if a lender approves you for a mortgage?
Here are some tips about what not to do once a lender has approved you for a mortgage. Don’t ignore your lender. The lender might have questions for you before you close on a loan. They might need more information or more documents. Whatever they need, replying to them should be a top priority.
What should I avoid when closing on a home loan?
You don’t want to do anything to delay your closing, or to turn your mortgage approval into a mortgage denial, so you’ll want to avoid taking any actions that could affect your home loan. In particular, you should be sure to avoid these five big mistakes. 1. Taking on new credit
Should you ask questions during the mortgage approval process?
There’s nothing wrong with asking questions during the mortgage approval process. You’re potentially signing up to borrow a huge amount of money for your future home, so feel free to ask your loan officer any mortgage questions you have when it comes to things you don’t understand or that you want to understand more deeply.
What should I avoid when applying for a home loan?
It’s best to avoid putting a lot of spend on your credit cards while applying for a home loan and it’s also a good idea to stop applying for any new credit cards too. New lines of credit can affect your credit score and can also represent potential debt to lenders investigating your financial history.