One of the most important steps in buying a home is getting your mortgage approval. But did you know that the loan approval can change to a denial if you are not careful? For most people, this is not an issue but here are some ways you can lose your approval.
One of the most common reasons is a job change. It could be as simple as getting laid off and then you will no longer qualify due to lost income. But for some people just changing jobs can affect the approval. If you are currently paid salary or hourly and switch to a commission income job, it will affect your approval. You also need a two year history if you are self employed. If you are thinking about changing jobs, talk to your loan officer before you do. It may not affect anything but it could change your approval and better to know before you make any changes!
The other very common reason people no longer qualify for their mortgage is a new purchase. If you need to purchase a car or some other big ticket item, talk to your loan officer first. For some a new car payment will mean the difference between an approval and a denial. So before you take out any new debt, talk to your loan officer. Also do not add big purchases to your current credit cards. Lenders will watch your credit report to make sure there aren’t any changes that can affect your debt to income ratios.
Make sure you make all your payments on time. If you miss a payment on a credit card or installment loan, it could affect your loan approval. If you apply for new credit, it can also affect your approval. We get notifications if you apply for new debt and you will need to let us know what the new payment is.
Once in awhile there are lender guideline changes that could affect you. This is rare, but can happen. Usually it’s something like a credit score requirement or maybe a debt to income change that affects your approval. Recently we had a change with price adjustments on conventional loans. One piece that has been delayed is an add on to your rate/points if your debt to income is over 40%. This has been delayed until August and we are hoping it goes away completely.
Your appraisal is another item that can affect your approval. If your appraisal value comes in low, that can affect your file. Work orders can also affect it. I have seen issues with basement walls that need a structural engineer report. Those can be expensive and may make you want to back away from the purchase.
The best thing you can do once you have a mortgage approval is avoid any new debt, don’t deposit large sums of cash into your bank account, keep saving until closing in case something does change. Keep in touch with your loan officer and if you are concerned about something, ask! I would rather solve an issue before it comes a problem we can’t fix!