Mortgage pre-approval is an important step of the homebuying process, helping buyers to solidify a budget and establish a relationship with a mortgage lender. But after the relief of pre-approval, you must carefully guard your finances.
From the time you get your pre-approval letter to the day you close on your home, your credit can be pulled up at any time. This means that any negative changes can either alter your terms or flub the deal altogether.
The good news is, the ways to protect yourself are straightforward. We will share with you what to do — and what not to do — after you are pre-approved for a mortgage.
Mortgage Pre-Approval: What’s Next?
First, pat yourself on the back: Your mortgage pre-approval means your finances check out. Pre-approval opens more opportunities for buyers, and can smooth out the process.
Once you’re pre-approved, you can more freely and quickly make an offer on the right home for you, because sellers understand you are serious about it.
How, then, do you protect this status?
First, let’s take a look at the list of items that make up your “financial profile.”
- Credit history/score
- Debt-to-income ratio
- Income
- Employment history
- Assets
This is your list of items to protect while you move through the rest of the homebuying process, from searching for the perfect home to making an offer and closing.
What to Do Once You Are Pre-Approved
Here is what you should do to protect your finances once you have your pre-approval letter.
Continue to Pay All Bills on Time
Any late payments on credit cards, utilities, rent, or other loans can quickly impact your credit score. Payment history is an essential part of your credit score, and missing payments is going to hurt.
If your lender pulls up your credit score at any point between pre-approval and closing, they will notice the dip — and it could be a warning to them that you may be likely to miss mortgage payments, too.
Maintain Your Debt Level — and Protect Your Savings
It’s always better to have less debt when it comes to the homebuying process. Many people work hard to pay down debt prior to pre-approval so they are as prepared as possible — and have a shot at the best rates.
After you are pre-approved, continue protecting your level of debt to preserve your hard work. Keep paying off credit cards, student loans, and other loans to boost your credit score and give you the best possible rates.
You also need to make sure you’re protecting your savings and sticking to your budget. Your lender needs to know you’re prepared to pay your closing costs.
Keep in Contact With Your Lender
Your mortgage lender is going to be your best resource when it comes to protecting your pre-approval. If you are about to make any financial move or life change, you should consult with them first to make sure it isn’t going to affect your pre-approval status.
If it is, you can discuss with them how to navigate next steps. If this change or decision is unavoidable, they can offer advice on how to move forward. If not, you can decide whether to hold off on making any decisions until after you have closed on a home.
That’s why it’s important to find a lender you can trust and feel comfortable with, such as the mortgage specialists at River City Mortgage.
The right lender will value building a relationship with you and helping you through the process.
What Not to Do After Pre-Approval
Now that you know what you should do once you’re pre-approved, here is what you should avoid.
Don’t Make Big Purchases
Once you’re pre-approved for a mortgage, you might start to dream of all the possibilities that come with having your own home. This can include new appliances, furniture, or even a new car.
But it’s always best to wait to make these big purchases until after you close on your loan. Paying for these items out of your savings will just lower your savings amount, which is never a good thing prior to the down payments and closing costs to come.
Using a credit card for these purchases will contribute to your debt and even possibly hurt your credit score. Also, beware of any deferred payment plans — even if you don’t have to start paying for an item until next year, it still will show up as debt on your credit report.
Don’t Switch Jobs
Since your pre-approval was based on your current income amount and job history, this major life change can affect your estimated loan amount.
If this is unavoidable, or if you are going to be making a lot more money at your new job, talk with your lender to see what they would need you to do if you went through with the change.
Don’t Open or Close Any Accounts
This includes bank accounts and credit card accounts. Opening a new credit card or closing an account will alter your credit score.
When it comes to your bank accounts, your lender is tracking your assets. Opening or changing accounts might look suspicious. Your best course of action is always to discuss this with your lender first.
Getting a mortgage pre-approval is an exciting time for a future homeowner. If you’re ready to get started or need some guidance on what you can and cannot do with your finances after pre-approval, reach out to River City Mortgage’s team of licensed loan officers.
We are excited to help guide you through the homebuying process and get you pre-approved for a mortgage loan.
