If you’ve just been pre-approved for a mortgage loan, your exciting journey to homeownership is just beginning. We want to make sure you’re as prepared as possible for this journey. So, we’ve compiled a list of things that could happen during the loan process that could delay your closing date or even cause your loan to be denied, in an effort to help you avoid them.
Don’t change jobs. Lenders like to know you have steady income, which is why most lenders ask for evidence of two years of employment. Changing jobs usually means your income changes—which, in turn, means your lender will need to run the numbers again to make sure you can still afford your loan.
Don’t make any major purchases. Spending large sums of money, especially on credit, will impact your loan. Your loan approval was made based on your specific amount of debt compared to your income. Financing large purchases like a washer/dryer or a refrigerator may seem like a great idea, but it could impact your ability to make your mortgage payments in the future. So, your lender will need to re-analyze your loan to make sure that your total debt after that new purchase isn’t too much to qualify for your home.
Don’t cancel your credit cards. Many borrowers think closing credit accounts will help their credit score. In reality, the opposite is true. As far as credit scoring companies are concerned, the more available credit you have, the better. Closing accounts reduces your available credit and lowers your score—which can affect your rate and loan approval. So, keep those accounts open.
Don’t change banks. Lenders will also look at your bank statements to see how well you handle your finances. If you change banks, you may not be able to access your old bank records quickly or easily, which can disrupt the loan process.
Do keep paying your bills. This probably goes without saying, but some borrowers have been known to miss paying their utility bills and rent in the excitement of buying a home. Lenders will check your finances and will look to see whether you continue to pay your bills on time. Not paying them could impact your approval.
Do keep your personal documents handy. Your lender will look at your income, bank statements and other financial documents before your loan will close. Typically, your lender will tell you what documents they’ll need. Whatever the loan officer or processor asks for, get it to them as quickly as possible.
Do read your disclosures. The first disclosure, the Loan Estimate, will include estimates of your loan costs and how much you’ll pay over the life of the loan. The second, the Closing Disclosure, you’ll receive three days before closing. Make sure you review it closely and compare the estimates to the final costs.
Do avoid overdraft fees on your bank account. Lenders pay attention to these charges to see how well you manage your finances. If you can’t manage your bank account, how well will you manage your mortgage payments?
Most importantly, do stay in touch with your lender. If anything changes with your job or your finances—whether you had a role in it or not—let your loan officer know right away. If there’s a problem, the sooner your lender knows about it, the more likely it can be solved.
You can probably see a trend here. As long as you don’t make any major changes to your finances, your mortgage has a great chance of closing without trouble. For more context behind these do’s and don’ts, check out our other blog, “What Happens Between ‘Clear to Close’ and Closing?”
If you have other questions about the loan process, one of our loan experts will be happy to answer them. Just reach out to us at email@example.com, or give us a call at 1-877-552-2242. We’re here to help!