You’ve saved your money and improved your credit score, so you think you are ready to apply for a mortgage. While you might be good and ready now, there are certain things you should do and things you should not do if you want to get and keep your mortgage approval.
Keep reading to find out the dos and don’ts of the mortgage approval process.
Do Get Pre-Approved by a Lender
Before you start shopping for a home, it’s important that you get pre-approved by a lender. Without the pre-approval, you have no idea how much you can afford. You might think you know, but a lender might have a completely different opinion, for the better or worse.
Taking the time to get pre-approved lets you know where you stand and what you can afford. This way you’ll know what price range you can afford, which helps you keep your home search more targeted.
Getting pre-approved also helps you know where you need to keep your financials. Once you get pre-approved, you shouldn’t change anything in your financial life including your credit score. It’s a good idea to ‘freeze’ your financial life where it is so that nothing changes regarding your pre-approval.
Do Keep Your Job
If you can help it, keep the same job you had when you were approved for the loan. If you change jobs after you already received your preliminary approval, you change the entire landscape of your loan. Lenders will verify your employment during the application process as well as again on the day of your closing. If you’ve changed jobs in between those two times, it can leave you without the loan you wanted.
If something does change with your job status, make sure you are honest with your lender. Let your loan officer know right away that you’ve changed jobs and the reason for doing so. The lender will then let you know what they need from you to help you keep your approval.
Do Have a Paper Trail for Your Deposits
Your lender is going to ask for the last 2 months of bank statements for any accounts that have money you’ll use for the closing. If you have any large deposits during that time, you’ll have to explain them. This means that you must provide proper paperwork to show the funds’ origination. It’s not enough to just tell a lender where you got the money – you need to prove it to show that it’s not a loan.
Do Have Good Communication With Your Lender
Communication is pivotal to your loan approval process. Throughout the process, your underwriter may need more information from you. If you don’t know, you could delay the process. If your loan officer doesn’t stay in regular contact with you, it’s important that you call him/her every few days. This way you know where you loan stands and if the underwriter needs any more information from you.
Don’t Ruin Your Credit
Once your lender pulls your credit and pre-approves you for a loan, you must keep your credit about the same. If you go and make a few payments late or you open new accounts, you change the entire landscape of your loan approval.
Just like lenders re-verify your employment on the day of your closing, they will do the same with your credit. If the lender pulls your credit on the day of your closing only to find out that your credit score fell 50 points or that you opened new accounts, they could cancel and/or delay your loan closing to make sure you still qualify.
Don’t Rack up Your Debt
When your lender figures out your debt ratio, you need to keep it there. If anything changes, it should be that your debt ratio decreases, not increases. If you go and make major purchases, increasing your debt, it could put your loan approval at risk.
While it’s tempting to run out and buy furniture and appliances, it’s best if you wait until after you close on your loan. Once you sign on the dotted line and take possession of the home, you are free to make your large purchases. Doing so beforehand, though, could leave you without your loan approval.
Don’t Apply for New Credit
Even though you think you are in the clear because you’ve got your loan pre-approval, the process isn’t complete yet. If you apply for new credit, you change everything about your new loan approval.
Lenders rely on your debt ratio and credit score when they pre-approve you for a loan. If you apply for new credit and you get it, you change how much money you have to spend each month. This decreases your disposable income and decreases your ability to make your mortgage payments on time. If you do apply for new credit, it could lower the amount of mortgage you are able to get.
The most important thing you can do to get your mortgage approval is keep everything the same. While it’s only for 30 – 60 days, it is likely the most important 30 – 60 days in your financial life. If you change anything during the mortgage process, make sure you are upfront with your lender so that you can work together to keep your approval.