You’ve been pre-approved. Now what?

You’ve been pre-approved! What now?

We have you pre-approved for a mortgage, so now what?  It is very exciting to get a pre-approval and now you know what you can afford to shop for.  Pre-approvals are typically good for 120 days and we reach back out to clients if we have not heard from them at this time.  We will pre-approve you and after the 120 days, it expires.  This means you will get a new rate hold and a new credit inquiry.  So, you need to be on your best behaviour to get a new pre-approval and a firm approval once you make an offer on a new home.  If we pre-approve you, you are not required to move forward with us for your purchase, but we’d love to have you!

Below, we have put together eight helpful hints to get your situation clean and your pre-approval in place!

#1 Don’t apply for new credit

Most lenders require us to do a new credit check before you get your firm approval.  If your credit check shows that you have new credit inquiries, you may have to prove that you don’t have any new debt, and this can slow things down.  Taking on additional credit can lower your credit score and impact what you can afford to buy.  It’s best if you want until you’re in your new home so you don’t take the risk.

#2 Don’t make any new purchases

If we have to pull your credit again and it shows that you have higher balances from making a new purchase, this may impact your pre-approval and prevent you from getting a firm approval when you need it.  If you’re buying some big like furniture, appliances, or building materials for a renovation, you should do it in cash that you have saved versus your credit card or credit line. And, if you use credit it will increase your debt service ratios, which is one of the major indicators that lenders use to determine your creditworthiness.  The higher your debt load, the less of a mortgage you can afford and this will reduce the price range you can shop in.

#3 Don’t pay off your debt without checking with us first

Paying off your debt can be helpful, but it can reduce the amount of cash that you have saved.  Check with us first to find out if you should continue to carry your debt or if it makes sense to pay it down.  You don’t want to use up cash you have saved for your down payment and closing costs as you have to prove to the lenders that you have the savings.  It can delay the process if your cash disappears.

#4 Don’t co-sign for anyone

A lot of people don’t understand that co-signing for new credit reports to your credit bureau and impacts your debt service ratio.  Any loan that shows up must be taken into account, even if it’s not your responsibility.  If that person defaults, it can hurt your credit and it is your obligation to ensure the payments are being made.

#5 Don’t change your employment

Even if you may be presented with a great new job, try not to change your employment during the process of buying a new home.  Often times with new jobs, there is a period where you are on probation and lenders will often condition for this period to pass before you can proceed.  Even if you believe your new job is secure, the lender will look at it as if it is an additional risk.  Of course, there are exceptions, but it can slow down the process.

#6 Don’t ignore the homework we give you

Take our homework we give you seriously.  As mortgage professionals, we specialize in mortgage financing and we know what the lenders will want on a final approval.  We don’t make recommendations or send you with homework for fun but instead, it is to help you get the best deal and an approval at the end of the day.  For example, if we tell you to not go out and buy a new car, take that to heart!  When we give you a list of required documents, then supply exactly what is on the list because we will need it.  Lenders audit our files and for you to get your mortgage funded, we need to meet their requirements.  No one wants their closing delayed because of documentation!

#7 Make sure you stay on time with your bills

Paying your bills on time will help maintain your credit and ensure it is stable and healthy.  Often times, this includes your overdraft protection, credit cards and lines of credit.  A credit inquiry is a snapshot in time and if we pull it again and see that there is a change in your payment history, this can impact your approval status.  You want to be consistent with your payments!

#8 Keep confirmation of any large deposits

If you are making any deposits that are outside of payroll, it is a good idea to keep the paper trail.  The lenders can ask for a 90-day history on your accounts and if there is anything outside the normal, they will ask us to prove it.  If we cannot provide the proof, this can delay the process.  The lenders want to ensure the deposits are coming from a legitimate source.

The list of suggestions above will help keep your personal financial outlook strong and get your pre-approved life on the go, but we encourage all our clients to talk to us to find out move.  We can set up an individual plan that can help you get ready to make the biggest purchase of your life.