Real estate agents often advise their clients to go
through the loan preapproval process before they even begin to look for a new home. The process is, typically, well worth
the effort because once preapproved for a loan, prospective borrowers not only
know what a lender is willing to contribute towards their purchase, but can also
avoid wasting time looking at unaffordable homes.
Keep in mind that a preapproval letter – even with a
contract -- is not a final approval. Unfortunately, inexperienced homebuyers
sometimes make the costly mistake of assuming that final approval of their loan
is guaranteed. This can lead to missteps
that potentially delay or prevent their loan approval.
Here are five common mistakes you need to avoid while
waiting to close on your home.
on New Debt
While waiting to close on your home, don’t add new debt for
household items such as furniture, appliances and decorating accents. Avoid financing any major purchases like a
new car or boat.
Sometimes even minor expenses can also be problematic when
there are too many new charges to your credit cards. So spend wisely and in a fashion that is
consistent with your prior habits during this period.
Large Amounts of Money
Play it safe and let your down payment funds “age” for at
least 90 days in your bank account(s).
Because lenders like stable finances and will review your bank
statements during underwriting, it’s important to avoid large deposits or
withdrawals. These transactions can send
up a red flag and delay the approval process.
Document thoroughly should you plan to use a gift or the
proceeds from the sale of an item such as boat or car. Your lender will require paperwork to track
the source of those monies.
to Pay Your Bills on Time
There’s a lot going on when you are planning a move, so
make sure to keep track of your bills. Packing can be distracting. So whether you are moving to your new home or
an interim location, make sure to contact all your providers ahead of time,
verify all your bills are current and provide your forwarding address to
minimize billing problems.
One way to avoid missing an important payment that could
negatively impact your credit is to consider setting up online, automatic bill
payments through your bank or with each provider individually.
Some folks say you should never cosign a loan. That’s debatable,
but you should certainly never cosign a loan while in the
process of buying a home. Lenders will
consider this new debt, recalculate your debt-to-income ratio, and potentially
reconsider approving your
Lenders love stability. So, if you are in the process of
buying a home, this is not the time to change jobs or even the way your pay is
structured – say from salary to commission based. But if you are offered that dream job at twice
your current salary and they need an answer by the end of the week, call your
loan officer and keep him in the loop. A loan officer who knows your situation
can be proactive, possibility restructuring your loan package for underwriting
so that no one is surprised a week before closing.
Minimize your risk by avoiding these contract-to-closing mistakes
and streamline your smooth transition into your new home.
If you have any questions about mortgage pre-approval or
the status of your credit, contact me for
reliable references to lenders who deliver expert advice and results. They can offer suggestions to improve your
score and I can help you find the home of your dreams.
Hoffman, ABR, ACRE, CDPE, CRS, e-PRO, GRI, SFR, SRES
Serving Chicago's North
Shore, North and Northwest Suburbs
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Allyson Hoffman is your ultimate real estate resource for Chicago's North
Shore, North and Northwest Suburbs and surrounding areas. Visit my website for
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