The mortgage preapproval is the first significant step towards the dream of buying your own home. After you prequalify at a bank or lender, you can go search for a house that can perfectly fit your needs. Take the help of an experienced real estate agent to find the one within your budget well before the settlement date. While you are at home hunting, you must pay attention to certain things that might cause your lender to cancel your mortgage preapproval.
It is important to avoid doing these things as your lender is likely to do a second credit check before a final loan approval. Any changes in your credit score until your mortgage closes might impact your chances of obtaining the loan at favorable terms. The worst can be a cancellation of your loan request by the lender. Here are some tips to help you avoid the mistakes after mortgage preapproval.
- Don’t Apply for a New Credit: Every time you apply for a new credit card your credit report is accessed, which is not a good thing for the health of your credit score. An impact in your credit score means an adjustment in the rates and terms you have been offered by the lender. Moreover, your lender might want to verify the new accounts you have opened, which can delay your settlement.
- Don’t Make Major Purchases: You can either pay in cash or use your credit to buy things that require a lot of money. In either case, you are going to make the things worse for you. If you have used the credit, it can change the debt-to-income ratio, resulting in a cancelled or delayed settlement. Using cash to buy furniture and similar unwanted things will cause a dent in your cash reserves, impacting severely your capability to make down payment and pay for closing costs.
- Don’t Close an Existing Account: If you have a credit card debt, you might want to pay off and close your account before the mortgage settlement. Don’t do this as the move can raise several questions that you might be asked by your lender before you can close on the loan. For example, they might want to know where you get the money to pay off the debt. Moreover, you will also reduce your cash reserves with such a move. Furthermore, you should be aware of the fact that closing down an existing account is not good for your credit score.
- Don’t Change Your Job: It is generally a good idea not to change your job after you have been preapproved at a lender. A change in employment will only complicate things for the lender and your settlement might be delayed. Besides, you will need two paystubs from two different companies instead of one in case of a job change. Your lender might also think it necessary to verify your new employment before the final approval.
- Don’t Miss to Pay Bills on Time: It is always a good habit to pay bills on time, especially when you need to apply for a mortgage at a lender. It is a good idea to activate auto pay from an existing checking or savings account. Moreover, you should also see that you don’t have an overdraft on any account and you don’t use all the credit available on your credit card.