5 Mistakes to Avoid After Pre-Approval
Being pre-approved doesn’t mean buyers are all set. There are certain mistakes that can throw buyers off course, and in some cases, lead to a denial of financing. Here are five common mistakes that can do just that:
Any large purchases—credit or cash—made after getting pre-approved can easily cause trouble for buyers. Making a large credit purchase equates to increasing debt, which raises a buyer’s debt-to-income ratio. Large cash purchases decrease a buyer’s cash-readiness from the time when they were pre-approved. In both scenarios, the lender may call into question a buyer’s ability to make their mortgage payments.
Quitting or Changing Jobs
Knowing that a buyer has a stable source of income is important to lenders. Accordingly, it is best for a buyer to wait until after the home loan process is complete before taking steps to change their employment. Not only could changing jobs potentially put their mortgage pre-approval at risk, but it could also delay their settlement, since it takes time to prove a new salary.
Missing bill payments can be especially harmful to a buyer’s candidacy in the time between getting pre-approved and closing on the home. During pre-approval, lenders are using your ability to pay bills on time to help them paint a picture of your finances and it’s important to keep that picture consistent.
Opening new credit accounts will likely change a buyer’s credit score, which may cause adjustments in their interest rate. Lenders, upon seeing a new line of credit, even a store credit card, may elect to review the buyer’s risk of non-payment.
Paying Off Debt
While most people would think paying off debt is a good thing, if a buyer pays off any significant loans or credit card debt after pre-approval, their lender will want to know where the money came from. The decrease in debt will also have an effect on the buyer’s debt-to-income ratio, which may alter their creditworthiness.