Congratulations…you went to your bank or mortgage company and have your pre-approval in hand.
This is an exciting time and you are ready to start looking for your home.
There are a few things I want to caution you on. Just because you have an approval doesn’t mean you are not still under the scrutiny of your lending institution.
Here are some things not to do:
1) Do not make a change of employment.
This is a very common reason to be denied a mortgage. Lenders take job security very seriously. They want to be assured you are going to be able to make your mortgage payment year after year.
There are also requirements for certain loans. For instance, an FHA mortgage requires a buyer to have a two-year work history.
If there are gaps in your employment a lender may ask you to prepare a written explanation for their underwriters.
It is not unheard of the be denied a mortgage because a buyer switched jobs especially if they completely switched careers.
2) Additional Debts
This is another very common reason for a mortgage to do denied after pre-approval.
The underwriter will go back and refresh your credit prior to closing on your new home to make sure there are not any significant changes.
This could impact your debt to income ratios and look to your underwriter like you no longer have to capable to afford your new home.
It’s amazing how many buyers have taken a loan for a new car after they have had their offer accepted on a new home. Then, to find their mortgage is denied and they can no longer purchase their new home.
3) Change in income
This may include anything that looks unusual to underwriting. No large withdrawals or deposits. The will trigger questions from your underwriters and additional documentation and explanations. They want to see regular paychecks and income.
If you can properly document your income it could lead to a rejection of a mortgage.
4) Negative hit to credit
Again, remember that they are going to refresh your credit prior to closing on your new home. Do not miss a payment on a credit card or loan.
This could potentially cause your credit score go down and the lender may consider you no longer qualified for the mortgage you were pre-approved for.
In conclusion, just don’t make any big changes in your life after your pre-approval until the time of closing.