Everyone has heard it's more difficult to get a mortgage approval now than it was a couple years ago. But very few are talking about keeping your mortgage approval! Once you have your approval, it's good for 60-90 days right? Well maybe!
One of the conditions of the approval is that there are not any material changes to your credit, income or the property prior to closing. Many lenders are now pulling credit reports more often then they used to. If your credit score drops during the loan process, it can affect your approval or maybe just your interest rate. I have had clients that get approved, then they don't find a house for 45-60 days. Frequently they won't be closing for another 30-45 days, so the original credit report is no longer valid. We have to pull a new report and sometimes the score is lower or the monthly payments are now higher. In some cases, people have increased their debt by buying a new car or opening a new credit card. Now the debt to income ratios are higher and they no longer qualify for the same mortgage.
Employment is another area that can cause a problem – no one wants to lose their job, but if you do, you no longer have a valid loan approval. Sometimes it's just a cut in the hours you get, some employers have given their employees across the board paycuts to keep companies open. All of these can affect your approval.
Once in awhile we have a problem with the property. Everything was fine when the purchase agrement was written, then due to weather or some other problem, the house is damaged. That can also affect your loan approval.
The main things to remember when applying for a mortgage and during the homebuying process are:
- Don't quit your job or switch employment – if you do, let your loan officer know
- Don't buy a new car or trade up on a new bigger lease payment
- Don't forget to pay your bills
- Don't open any new credit cards, even for a discount
- Don't accept a cash gift without getting gift paperwork
- Don't deposit large amounts in your bank account with proper documentation
Lenders know that life happens and sometimes you can't avoid having one of these things come up. If they do, let your loan officer know about it when it happens. Or if you think you are going to have to buy a car or may have employment problems, talk to your loan officer and figure out what you can do to keep your approval. It's much easier to be prepared than to have a problem right before closing! No one wants that to happen.
