You’re pre-approved for a loan – congratulations! You’ve just taken the first step to purchasing your new home.
While a pre-approval shows that your lender could provide you with a loan in that amount, it only applies to your financial situation at the time of the pre-approval. Meaning, if your financial situation changes drastically from the day you’re pre-approved to when you find a home to make an offer on, your pre-approval may not still stand with the same terms.
Many life changes can affect your pre-approval, so make sure you don’t commit one of these all too common pre-approval mistakes.
Applying For New Credit
After being pre-approved, don’t apply for a new credit card or loan. And yes, store credit cards count. Not only do the credit checks required to get a new line of credit temporarily ding your score, but being approved for a new line of credit can change your credit score and/or your debt-to-income ratio.
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Making Major Purchases
Of all the pre-approval mistakes listed, we’d say this is one of the most common. We know that you’re excited for a new home, but it’s important to not go out and buy new furniture. Your purchases can affect your debt-to-income ratio when bought on credit and can reduce the amount of your assets when bought with cash. Other common major purchases to avoid include new cars, vacations, home renovations, and appliances.
Moving Large Sums Of Money Around
During the pre-approval process, making large deposits or moving around large sums of money can delay the process. Your lender won’t ask for documentation for deposits from a verifiable source like your employer or an IRS tax refund. However, if a friend happens to pay you back the $700 she owes you, you’ll need to be able to prove where it came from.
Co-Signing On A Loan
You may think that co-signing on a loan is harmless, but the loan is considered a debt for both parties, especially on new loans. That means co-signing on a loan can negatively affect your debt-to-income ratio.
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Quitting Or Changing Jobs
We use pay stubs to verify your employment for a loan. So, changing jobs after being pre-approved can result in a big delay.
While you’re avoiding making the pre-approval mistakes above, we also recommend that you:
- Notify us of any changes to your application
- Include any/all liabilities and debts with your loan application
- Include all documentation with your application
- Give us a call if you have any questions during this process
- Rest assured knowing we’re on your side and have all of our experience working for you
As you can see, there are quite a few pre-approval mistakes to avoid. We advise all of our clients to consult us before making any financial decisions during the pre-approval process. If you’ve already made one of these mistakes or need to make one, give us a call at 402-991-5153 so we can make sure it has as small of an impact on the loan process as possible.