Common Mistakes After Mortgage Pre-Approval

Avoiding These 5 Common Mistakes After Mortgage Pre-Approval

Securing pre-approval for a mortgage signifies a significant milestone in the homebuying journey. It demonstrates to sellers that you’re a serious contender and streamlines the offer process. However, the work isn’t over yet. Certain actions taken after pre-approval can jeopardize your chances of securing the loan.

Common Mistakes After Mortgage Pre-Approval

Excessive Credit Applications

Pre-approval is based on a snapshot of your current creditworthiness. Incessantly applying for new credit cards, auto loans, or other lines of credit can negatively impact your credit score and debt-to-income ratio, potentially derailing your mortgage approval.

Big-Ticket Purchases

While celebrating your pre-approval might be tempting, avoid splurging on expensive furniture, appliances, or vacations. Significant purchases can raise red flags for lenders, indicating an increased financial burden and jeopardizing your ability to repay the mortgage.

Co-Signing on Loans

Co-signing on a loan for a friend or family member can be risky. If the borrower defaults, it can severely damage your credit score and complicate your own mortgage approval.

Job Loss or Job Change

Losing your job during the mortgage process can significantly impact your ability to secure a loan. Lenders assess your employment stability to ensure your capacity for consistent loan repayments.

Missing Payments

Falling behind on existing bills, such as credit card payments or car loans, can negatively affect your credit score and raise concerns for lenders about your financial responsibility.

Additional Considerations

  • Changing Bank Accounts: Switching bank accounts after pre-approval can raise red flags for lenders, especially if your new account has limited transaction history. Maintaining a consistent banking history demonstrates financial stability.
  • Large Deposits: Unexplained large deposits into your bank account can trigger scrutiny from lenders. If you anticipate receiving a significant sum of money, consult your lender beforehand to avoid delays or complications.
  • Employment Changes: While some career advancements might be positive, significant job changes, especially those with lower income or reduced stability, can impact your mortgage approval.
  • Not Providing Loan Documentation Promptly: Delays in submitting requested documents to your lender can stall the loan approval process. Be prepared to promptly provide any necessary paperwork to ensure a smooth and timely closing.

Common Questions

Can I make small purchases after receiving pre-approval?

Generally, minor purchases that won’t significantly impact your debt-to-income ratio are acceptable. However, it’s advisable to consult your lender for specific guidance.

What if I have an emergency expense after pre-approval?

Discuss any unforeseen circumstances with your lender. Depending on the nature of the expense, they might be able to provide solutions or adjust your loan terms accordingly.

How long does pre-approval typically last?

Pre-approval validity periods typically range from 30 to 90 days. It’s crucial to stay within this timeframe to avoid the need to re-apply and potentially impact your credit score.

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