Mortgage Tips: 9 Buyer Must-Do's After Initial Pre-Approval
While it may seem obvious that you need to keep paying your bills
during the period between a loan preapproval and your settlement date,
some would-be borrowers neglect their finances in the excitement of
shopping for a home.
"A preapproval letter is typically valid for
90 days but with the disclaimer that if anything changes with your
finances it can impact your preapproval," says Patricia Napgezek, a
senior loan officer with Inlanta Mortgage in Brookfield, Wis. "After 90
days, we can do a renewal letter with a recheck of your pay stubs and
credit."
No. 1: Don't apply for new credit.
Mortgage lenders are
required to do a second credit check before a final loan approval, says
Doug Benner, a loan officer with Embrace Home Loans in Rockville, Md.
"If
it's just an inquiry, that usually doesn't cause a problem, but if
you've opened a new account, then it will have to be verified, and that
could delay your settlement," he says.
Your credit score could change because of the new credit, which may mean that your interest rate must be adjusted.
No. 2: Don't make any major purchases.
If you buy furniture
or appliances with credit, your lender will need to factor in the
payments to your debt-to-income ratio, which could result in a canceled
or delayed settlement. If you pay cash, you'll have fewer assets to use
for a down payment and cash reserves, which could have a similar impact,
Benner says
No. 3: Don't pay off all your debt.
"Every move you make with
your money will have an impact, so you should consult with your lender
before you do anything," says Brian Koss, executive vice president of
Mortgage Network in Danvers, Mass. "Even if you pay off your credit card
debt, it can hurt you if you close out your account or reduce your cash
reserves. We'll also need to know where the money came from to pay off
the debt."
No. 4: Don't co-sign any loans.
Koss says borrowers sometimes
assume that co-signing a student loan or car loan won't affect their
credit, but it's considered a debt for both signers, especially when
it's a new loan.
"If you can give us 12 months of canceled checks
that shows that the co-signer is paying the debt, we can work with that,
but payments on a newer loan will be calculated as part of your
debt-to-income ratio," Koss says.
No. 5: Don't change jobs.
"If you can avoid it, try not to
change jobs after a preapproval," Koss says. "Even if it seems like a
good move, we'll need to verify your employment and you'll need one or
possibly two pay stubs to prove your new salary, which could delay your
settlement."
No. 6: Don't ignore any lender requests.
"If your lender
recommends something, you should follow directions and do it," Napgezek
says. "You should provide all documents as soon as they are requested,
because delaying could potentially delay your settlement."
No. 7: Stay current on your existing accounts.
Koss says that
you must pay all bills on time and make sure you don't have an
overdraft on any account. If you have payments automatically billed to a
credit card, you should continue that practice. "Your preapproval is a
snapshot in time, and you want to make sure your finances stay as close
to that snapshot as possible," he says.
No. 8: Keep a paper trail of all deposits.
Adding to your
assets isn't a problem, but you have to provide complete documentation
of any deposits other than your usual paycheck, says Joel Gurman,
regional vice president with Quicken Loans in Detroit. "Make sure you
document everything," he says. "Be proactive and contact your lender if
you receive a bonus or if you're cashing in your [certificates of
deposit] to consolidate your assets. A good lender can advise you on
what you'll need for a paper trail."
If you're receiving gift funds, make sure you have a gift letter from your donor.
No. 9: Discuss seller concessions.
"Even in a sellers market,
there's sometimes an opportunity to negotiate help with closing costs,"
Gurman says. "Your lender needs to know if you are intending to ask for
seller concessions or if you get them so that they can be factored into
the loan approval.
"Make sure you discuss everything with your lender and stay in constant contact throughout the loan process," he says.
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Christie Farris, Baton Rouge, LA
