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by Daniel B. Kline
November 13, 2017
by Daniel B. Kline
November 13, 2017
Getting approved for a mortgage is not the same as getting a mortgage. Until your lender has transferred the money to your buyer's bank, it's still possible for the process to be derailed.
That means that once you have received a "yes," you still have to be careful. Your lender will be watching you and will continue to monitor your credit and your general financial well-being.
Sometimes issues like inspections or caveats about the seller finding a new home can delay your closing. Be diligent about your finances until you actually own the home and avoid doing these things that can derail your approval.
1. Don't make a big purchase
When a lender decides whether to give you a mortgage, it looks at your ratio of debt to income. If you take out a loan for another major purchase -- say, a car -- you change that ratio substantially. Paying cash won't prevent a mortgage snafu, either, because your lender will see the sudden hit to your bank account, and lenders don't want you to be short on cash after making a down payment.
Even if the purchase isn't enough to prompt the lender to deny your mortgage, it could lead to higher borrowing costs. It's possible your lender may change the terms of your mortgage, handing you a higher interest rate because you've taken on more debt or lowered your assets before your loan closes.
2. Don't get fired or quit your job
The amount of income you have coming in is one of the key factors banks consider when determining whether you qualify for a loan. Generally, you have to provide two pay stubs to prove your income, but if a closing gets pushed back, your lender may ask for continued proof of employment.
Even if you have an offer for a better job and would simply be trading one income stream for another one, it's always best to ask your lender before making a move. In the case of a job switch, you may need to provide an offer letter, and your new employer may have to verify your start date and salary.
3. Don't open a credit card
Another factor in whether you qualify for a loan to buy a home is how much credit you have available to you. There's a sort of "sweet spot" where your lender will believe you have enough available credit but not so much that you can run up debt that will impact your ability to pay your mortgage.
In addition, opening a credit card requires a credit check. That can lower your credit score, which your lender may continue to monitor through your closing.
4. Don't make any major money moves
When my wife and I bought our current home, before we closed, I received a fairly significant payment from a company I then owned a piece of. Given that it was money coming in, not going out, it was generally viewed as a positive by our lender, but it still needed to be explained.
We had to prove that the money was earned and was not a loan of any type. That's because the mortgage company does not want anyone making a down payment with money that must be paid back. That's why any non-paycheck income should be declared and explained, as should any expenditure that's outside the norm.
In addition to your pay stubs, your mortgage lender will ask for bank statements -- usually 90 days' worth. If your mortgage closing gets delayed, the lender may want to see new statements as they come in.
5. Don't get ahead of yourself
Basically, while you wait to close on a house, consider your finances to be in a state of suspended animation. Don't do anything that changes the picture your potential lender sees. Even a move as small as getting a store credit card from a home improvement store -- something many new homeowners do -- should wait until after you actually own the house.
Remember that the most important thing is closing on the house and owning your new home. Everything else can, and should, wait.