Congratulations, you’ve been pre-approved for a mortgage! Now comes one of the best times of the home-buying process: shopping.
But something weird happens when people get pre-approved. We don’t really know what comes over people at this stage, but we see it a lot. Once clients see what they can afford for a new home, they think they have more money than they actually do, and they want to go spend.
STOP! Put that credit card away. Freeze it in a block of ice. Don’t even think about touching it until you’re moved in and settled. These are the 10 things NOT to do after your pre-approved so you don’t risk your pre-approval.
1. Don’t Apply for New Credit
One of the most important things not to do after you’ve been pre-approved is to acquire more debt, such as that credit card from the local furniture store to fit new furniture in your home.
First, you don’t have the house yet so why are you buying furniture? Second, applying for more credit could negatively affect your credit score, and extra debt could change your debt-to-income ratio we used to qualify you in the first place.
If a lender sees that change, you may be denied your mortgage once you’re ready to buy your new home.
2. Don’t Make Any Big Purchases
Don’t buy winter tires, a new computer, or a new mattress right now. You’re going to need that cash for closing costs on your new home, so just hide it under your old mattress until the deal is closed.
3. Keep Paying Your Bills
While you’re avoiding getting into more debt right now, don’t forget to keep paying the bills for your current debt. Missed payments after your mortgage pre-approval are not the signs you want to send lenders.
4. But Don’t Pay Off All of Your Debt Completely
If you pay off all of your debt after you’ve been pre-approved, your lender will want to know where that money came from. That will mean more paperwork from you so we can track these funds and more scrutiny from the lenders about where you received the money.
It also won’t look great if you close out a credit card or account. So keep paying the bills and wait until after you’ve closed your home purchase, including closing costs, to pay off those credit cards.
5. Keep A Paper Trail
While we’re mostly paperless, there is some paper you need to keep. Make sure you keep a record of all deposits made into your accounts after you’ve been pre-approved.
If Grandma gave you some money to help buy your new home, your lender will want to know that. Large deposits could raise a red flag that you’ve borrowed money from somewhere else, which could have an impact on your debt-to-income ratio and how much you are actually able to borrow.
Keep all your receipts and statements until your purchase is finalized.
6. Don’t Start a New Job
If you can hold off, don’t start a new job until after you’ve moved into your new home.
Your mortgage pre-approval is based on your current income and tenure on the job. Changing jobs typically means changing income. This could affect the amount you’re actually allowed to borrow. Your lender will likely need proof of employment or pay stubs as part of their lending process, and if you can’t provide those right away, your loan could be denied. Many new jobs come with a probationary period that may become problematic as well.
If you have to, and we mean HAVE TO, change jobs, let your broker know as soon as it happens. Don’t wait. Seriously. We won’t be mad.
7. Don’t Co-sign Someone Else’s Loan
You may think you’re doing your child or your sister a favour by co-signing their loan, but this could backfire when you’re ready to get your mortgage. Even if it’s not your loan, it could still affect your debt-to-income ratio.
And again, we would have to ask you for paperwork.
8. Don’t Ignore Requests From Your Lender or Broker
The lender that has provided your pre-approval may need additional documentation or information. So when your broker emails, calls, texts —whatever the case —don’t ignore their requests if you want to keep your pre-approval in check.
Also, remember that the home-buying process can move quickly. If you take a vacation after receiving your mortgage pre-approval, or if your broker or lender isn’t able to contact you, you may miss deadlines for important documentation or confirmations. If you do have to be away, let your broker know how they can contact you if required.
9. Don’t Forget About Seller Concessions
The person you’re buying your home from may have some concessions in place that you will be required to cover in your purchase price. These can include inspection fees, title insurance costs, or lawyer’s fees, just to name a few. If these costs will be part of your mortgage, you need to let your broker and lender know.
10. Don’t Ghost Your Broker
Ghosting is never ok, especially when buying a home. We know that buying a new home can be a busy time, but it’s important to keep your broker in the loop during the process.
If anything has changed in your financial or employment status, or you’ve found a home that is more than your current pre-approval, let your broker know right away.
Seriously. Even if you’re thinking about a more expensive home, call your broker. Think of us as your financial conscience.
Keep Life Simple
While buying or selling a house is sometimes fun and exciting, there’s a lot of stress too. You are about to make a big financial commitment after all.
Our best advice is to keep things simple during this process. Don’t buy anything (you’re already buying a house), keep paying your bills, and keep your broker updated if something changes.
Buying new furniture, getting new loans or paying off existing loans could affect your ability to get your home. Once you’ve been pre-approved for a mortgage, don’t change anything else in your life unless absolutely necessary. And if something does change, let your broker know as soon as possible to avoid potential issues down the road.