9 Obligations Following Mortgage Preapproval
January 23rd, 2014
January 23rd, 2014
Congratulations, you’ve been pre-approved for a mortgage loan. Now the fun begins, you can start shopping for a new home. But in all of the excitement of looking for your dream home, don’t neglect your financial obligations.
Typically, mortgage preapprovals are valid for 60–120 days, depending on your lender. However, if anything changes with your finances before you take possession of a home, or if your preapproval expires, your lender can do another credit check. (Note: Most lenders actually pull your credit report again before your closing date, just to make sure you haven’t incurred any additional debt.) And, depending upon your finances at that time, you may or may not qualify for a loan on that dream home you’ve found.
So, to ensure you stay qualified for your loan from the time of your preapproval until your closing date, follow this list of financial must-dos.
1. Don’t apply for any new credit.
If you’ve had any new credit inquiries or you’ve opened a new account, your lender will need to verify it. Verification takes time which could delay your closing. If you have acquired new debt, this could affect your credit score, which also could affect your loan qualification.
2. Don’t make any major purchases.
Granted you may need new furniture or appliances for your new home, but don’t buy them before closing. Otherwise, if you make your purchases with credit, your new credit card balance will be factored into your debt-to-income ratio, which may lower your maximum loan amount. If you decide to make your purchases with cash, you’ll have less cash reserves and, possibly, not enough money for your down payment.
3. Don’t pay off all of your debt.
If you decide to pay off any credit card debt or other loans, talk to your lender first. You could possibly reduce your cash reserves needed for your down payment. Plus, your lender will need to verify where the money came from to pay off the debt, possibly affecting your closing date.
4. Don’t co-sign any loans.
Whenever you co-sign on a loan, such a student loan for a child, it affects your credit, too – even if the other person is making the payments. Because if the other person stops making payments, you must make the payments instead. So, this debt is calculated into your debt-to-income ratio.
5. Don’t change jobs.
While a new job may seem like a good idea, especially if you’re making more money, it also means your lender will have to verify your new employment. To prove your new salary, your lender will likely need 1–2 pay stubs, which could delay your closing.
6. Don’t ignore any lender requests.
Make sure you provide all documents that your lender requests. These documents help your lender verify your financial information. Any delays in getting this information to your lender could possibly delay your closing. Also, if they don’t receive these documents, your lender may not fund your mortgage.
7. Stay current on your existing accounts.
Continue to pay your bills on time. Also, make sure you don’t overdraft on any account. Continue making automatic bill payments via a credit card, if these processes were in place during preapproval credit check. Keep your finances as consistent as possible to the time of your preapproval.
8. Document all deposits.
If you have any large deposits other than your usual paycheck, such as a bonus, cash from a certificate of deposit, or a gift fund, you will need to provide documentation to your lender. They will need to verify where this money came from.
For gift funds, the donor will need to provide you with a gift letter stating their name, your name, the date of the gift, the amount and a statement saying the funds are a gift that doesn’t have to be repaid.
9. Discuss seller concessions.
Make sure you tell your lender if you intend on asking the seller for help with the closing costs. These concessions need to factored into the loan approval.
If you’re in the processing of buying a new home or refinancing an existing home, contact the mortgage specialists at Grandview Lending. We will walk you step-by-step through the loan preapproval process. By completely discussing your financial situation with us, providing all of the necessary documentation and staying in constant contact along the way, your loan process should go smoothly, so you can be in your dream home as soon as possible.
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