How to Prepare for a Mortgage Pre-approval
There are some essential things to remember once you've applied for a mortgage to buy a property. While it's wonderful to start thinking about moving in and decorating, keep in mind that any major purchases should be avoided until after you've closed on the property. Here are a few things that you may not have considered before applying for your home loan.
Don’t Deposit Large Sums of Cash
Lenders need cash, and money isn't as easy to trace as it may seem. Before you put any amount of money into your accounts, consult with your loan officer about the proper way to document your transactions.
Don’t Make Any Large Purchases
You may not be accepted for a loan if you have made any major expenditures, including items for your home. Lenders will look for red flags in all types of charges. People with new debt have greater debt-to-income ratios (a measure of how much debt you owe compared to your monthly income). Borrowers may no longer be eligible for their mortgage since higher ratios imply riskier loans. Set a budget for your household and stick to it. Avoid making any significant purchases, even on furniture or appliances.
Don’t Co-Sign Loans for Anyone
When you co-sign for a loan, you're assuming responsibility for its success and repayment. As a result of your responsibility, your debt-to-income ratios will be higher. Even if you promise not to make the payments yourself, your lender must account for them against you.
Don’t Switch Bank Accounts
Lenders must find and keep track of your assets. It's much simpler when all of your accounts are consistent. Consult with your loan officer before sending any money.
Don’t Apply for New Credit
It doesn't matter if you're applying for a new credit card or a new automobile. When your credit report is run by organizations in several financial channels (mortgage, bank account, credit card, auto loan, etc.) your FICO® score will be affected. Your mortgage interest rate and perhaps even your approval might be impacted by low scores.
Don’t Close Any Accounts
Many people believe that having less accessible credit makes them less risky and more likely to be accepted. This isn't accurate. The length and depth of your credit history (as opposed to just your payment history) and the proportion of available credit you use overall are important aspects of your score. Closing accounts has a detrimental influence on both aspects of your score.
In Short, Consult an Expert
To summarize, be honest about any changes when communicating with your lender. If you're at risk of losing your home loan, several factors should be considered and implemented in such a manner that it is certain that your mortgage will be approved. If your job or employment status has changed recently, discuss this with your lender as well. Finally, before you do anything financially, it's critical to inform and discuss your goals with your loan officer completely.
You want your home purchase to go as smoothly as possible. Before you make any significant financial decisions, rearrange your finances, or undertake any major life changes, be sure to speak with your lender - someone who is qualified to explain how your financial choices may influence your house loan.