What Not to Do After Getting Pre-Approved for Your Mortgage

You’ve been pre-approved for a mortgage, congratulations! These words will likely put you at ease when you hear them, knowing you’re ready to make an offer on the home you want to buy. There are some common mistakes borrowers make during the time between getting pre-approved and closing that end up costing them in major ways, and we want to help you avoid them.

Whether you’ve already been pre-approved or not, make sure to avoid these common mistakes during the process

Taking on New Debt

After being pre-approved for a mortgage, it’s crucial to avoid taking on new debt. This includes opening new credit accounts, applying for credit cards, financing a car, or making large purchases using credit. Taking on new debt can increase your debt-to-income ratio (DTI), which is a key factor that lenders consider when evaluating your mortgage application.

A higher DTI ratio may indicate to underwriters that you have a higher risk of defaulting on your mortgage payments, potentially leading to a denial of your loan application or a less favorable interest rate. If at all possible, avoid taking on any debt until you have closed on the mortgage, even if you are confident you can afford it.

Changing Jobs or Employment Status

Stability and consistency in employment are important factors that we consider when issues a pre-approved letter to our clients. Changing jobs or employment status after getting pre-approved can raise concerns about your ability to repay the loan, and may make it impossible for underwriters to give you a pre-approval letter.

Even if the new job offers a higher salary or better benefits, a stable employment history is often preferable. Additionally, switching to a commission-based job or becoming self-employed can complicate the income verification process and may require additional documentation, potentially delaying or derailing your mortgage approval.

Large Deposits and Withdrawals

Any significant changes to your bank accounts, such as large deposits or withdrawals, can raise red flags during the underwriting process that can affect your pre-approval and end up causing you to lose you’re pre-approved letter. Large deposits may need to be sourced and documented to ensure they are not loans or gifts that could impact your ability to repay the mortgage. Similarly, large withdrawals could deplete your cash reserves, affecting your ability to cover closing costs or make a down payment. It’s best to avoid making major financial transactions or moving money between accounts without consulting your loan officer first.

Missing Payments

Maintaining a strong credit profile is essential throughout the mortgage approval process. Missing payments on existing debts or defaulting on loans can significantly impact your credit score and raise concerns for lenders about your financial responsibility. Even after you’ve been been given your pre-approval for a mortgage, you can expect that we will conduct a final credit check before closing to ensure your financial situation hasn’t changed. Any negative changes to your credit report could result in a denial of your loan application or higher interest rates.

Maxing Out Credit Cards

Significant changes to your credit utilization ratio can affect your credit score and raise concerns for loan approval. Maxing out credit cards or closing accounts can alter your credit utilization ratio, which measures the amount of available credit you’re using compared to your total credit limit. A higher credit utilization ratio can negatively impact your credit score and signal financial distress. It’s advisable to maintain low credit card balances and avoid making significant changes to your credit profile during the mortgage approval process.

We don’t want applying for a mortgage to be stressful for you. With the right information and a team of experienced pros on your side, it doesn’t have to be. Want to learn more about qualifying for a mortgage? We are here to help, so contact us any time.