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You got pre-approved for a mortgage – congratulations! This is the most important step towards becoming a homeowner. The market here in Halifax is very competitive, so it’s great to have the advantage of a pre-approval. Now, you may be wondering what your next step is. You spent all this time working towards getting your pre-approval, so now what?
While there are certainly actions you should take, there’s also a lot of important things you should avoid at this time!
Do: find a realtor
Your pre-approval lasts 120 days, so it’s time to start searching for a home! First things first, find a real estate agent. They will help you find suitable properties and will handle all the hard work, such as putting in offers, negotiating, and taking care of the essential paperwork. Needless to say, they’ll be a big part of your experience. If you don’t have a realtor and don’t know where to start looking, ask your mortgage broker. They can provide recommendations of realtors they’ve had positive experiences with.
Now comes the fun part: looking for houses! By this point, you already know your budget, but you should also have an idea of what you’re actually looking for in a home.
For instance, this is the time to narrow down the type of home you want, if you haven’t already done so. Consider if you want a townhome, a detached house, a condominium, etc. Also, think about the size of the home you want, which will likely correspond with your budget. Finally, make sure you narrow down the areas you’re interested in. It’s good to have a general idea of neighbourhoods and cities, so you can see as many relevant properties as possible while weaning out the ones that don’t match your criteria.
What not to do
On the flip side, there’s a whole host of things you shouldn’t do once you’ve been pre-approved for a mortgage. The most important next steps are really about avoiding certain actions. Remember, pre-approvals are based on what the bank or lender knows about your situation at the time you qualify. The reason they’re not guaranteed is because your financial situation can change during the process – so avoid these next things in order to keep your finances steady.
Don’t: take out new loans
Don’t take on any major projects or purchases that will require you to get a loan. This includes loans for renovations, debt consolidation, and vehicle financing. You got pre-approved for a mortgage based on specific information about your debt and assets, and new loans will obviously throw these numbers off. Your debt service ratio will increase, which might result in the lender changing their mind about offering you a mortgage. You can read more about debt service ratios here.
Don’t: get a new line of credit
Just like with loans, you should also avoid taking out new credit cards or other lines of credit. Your pre-approval is partly dependent on your available credit, so it’s not a good idea to decrease your credit with more debt. Of course, you can still use your existing credit cards. Just don’t add another card to your collection, and try to avoid using it more than usual.
Don’t: miss payments
We all have to make payments – credit cards, cars, and monthly housing expenses affect us all. That’s fine! There’s no need to cut yourself off from your existing loans, because your pre-approval takes these into consideration. The key, however, is to not miss any payments.
Missing a payment can do two things. One, you’ll likely be charged a late fee, so you’ll end up owing more, and two, it’s possible that your credit score can drop – which isn’t what you want your lender to see if they’ve given you a mortgage pre-approval. Your credit score contributes to their willingness to pre-approve you, so a dip can cause them to back out.
This kind of situation is a much bigger issue if it happens frequently, but it’s still best to avoid it altogether.
Don’t: go further into debt
To wrap all of these previous points together, don’t go further into debt. Keep your financial situation steady, and keep saving as you’ve been doing. Don’t suddenly stop paying off your credit card in full each month. Don’t rack up late fees and extra interest. Basically, don’t put yourself into a situation where you owe more than your lender expects.
Getting your pre-approval is exciting! It means you’re well on your way to becoming a homeowner. By paying attention to your spending and saving habits, you’re putting yourself into a great position.
If you’re looking to buy a home and need help with the mortgage process, feel free to contact us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or get in touch with us here.