Avoid These Mistakes After Pre-Approval

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Financing

While it may seem obvious that you need to keep paying your bills during the period between a mortgage pre-approval and your settlement date, some would-be borrowers neglect their finances in the excitement of shopping for a home.

Getting pre-approved for a mortgage is no easy task, so the last thing you want to do is lose sight of your finances after you have been pre-approved.

Here are nine mistakes to avoid after you have been pre-approved:

No. 1: Applying for new credit

Mortgage lenders are required to do a second credit check before a final loan approval.

If it's just an inquiry, that usually doesn't cause a problem, but if you've opened a new account then it will have to be verified and that could delay your settlement.

Your credit score could change because of the new credit, which may mean that your interest rate must be adjusted.

No. 2: Making major purchases

If you buy furniture or appliances with credit, your lender will need to factor in the payments to your debt-to-income ratio, which could result in a cancelled or delayed settlement. If you pay cash, you'll have fewer assets to use for a down payment and cash reserves, which could have a similar impact.

No. 3: Paying off all your debt

Every move you make with your money will have an impact, so you should consult with your lender before you do anything. Even if you pay off your credit card debt it can hurt you if you close out your account or reduce your cash reserves. The lender will also need to know where the money came from to pay off the debt.

No. 4: Co-signing loans

Borrowers sometimes assume that co-signing a student loan or car loan won't impact their credit, but it's considered a debt for both signers, especially when it's a new loan.

If you can give the lender 12 months of cancelled checks that shows that the co-signer is paying the debt, the lender can work with that, but payments on a newer loan will be calculated as part of your debt-to-income ratio.

No. 5: Changing jobs

If you can avoid it, try not to change jobs after a pre-approval. Even if it seems like a good move, the lender will need to verify your employment and you'll need one, or possibly two, paystubs to prove your new salary, which could delay your settlement.

No. 6: Ignoring lender requests

If your lender recommends or requests something specific, you should follow directions and do it. Providing all documents as soon as they are requested can help avoid delays in the settlement process.

No. 7: Falling behind on your bills

You must pay all bills on time and make sure you don't have an overdraft on any account. If you have payments automatically billed to a credit card, you should continue that practice. Your pre-approval is a snapshot in time and you want to make sure your finances stay as close to that snapshot as possible.

No. 8: Losing track of deposits

Adding to your assets isn't a problem, but you have to provide complete documentation of any deposits other than your usual paycheck. Make sure you document everything. Be pro-active and contact your lender if you receive a bonus or if you're cashing in your CDs to consolidate your assets. A good lender can advise you on what you'll need for a paper trail.

If you're receiving gift funds, make sure you have a gift letter from your donor.

No. 9: Forgetting seller concessions

Even in a seller's market there's sometimes an opportunity to negotiate help with closing costs. Your lender needs to know if you are intending to ask for seller concessions or if you get them so that they can be factored into the loan approval.

Bottom Line:

Each lender may handle the process differently so make sure you discuss everything with your lender and stay in constant contact throughout the loan process.

If you’ve thought about buying this year but have held off, now may be the time to take advantage of these historically low interest rates. Feel free to reach out to me to understand how the current market trends affect your real estate goals and to see how now might be best time for you to buy your new home. 

I specialize in helping buyers understand our North Carolina market and the buying process, all while protecting your needs and best interests. Call me...I'd love to help!

Jean Scott Realty

Mobile:  919-675-5366

E-Mail:  Jean.Scott@kw.com

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Two Locations to Better Serve You:

Raleigh:              4700 Homewood Ct., Suite 200, Raleigh, NC 27609

Wake Forest:    1744 Heritage Center Dr., Suite 201, Wake Forest, NC 27587

 

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