If you’re beginning the process of buying a home, especially in this busy seller’s market, we recommend that you start with a mortgage pre-approval. This first step will give you a clear understanding of the maximum amount you will qualify to borrow, and provide you with an interest rate quote that is valid for 120 days while we search for your new home. Since “Knowledge is Power”, you can now confidently set a home budget and payment plan that suits your lifestyle. It is important to note however, that a “pre- approval is NOT a Final mortgage approval. So, while the mortgage specialist you have chosen will have reviewed your personal finances at the time of your initial application, a final credit check will be completed at the time you place an offer on your dream home. This means any major changes you make to your finances after the initial application was completed can jeopardize the final amount you qualify to borrow.
Having dealt with many situations that have required a bit of negotiations last minute, we decided to offer you some friendly advice on how to keep your final mortgage approval on the right track.
1. Do not make Big purchases that involve a new loan. Now is not the time to buy a new car. The additional payment amount for the financed item will factor in to your mortgage application. As any increase to your monthly debt payment structure will affect the amount you qualify to borrow. Depending on your circumstances, and we have seen this happen, in some cases it can disqualify your mortgage application altogether!
2. Do not apply for a new credit card. Though the offer of a free toaster or cozy blanket may seem to good to pass up, a credit card applications does require a hard credit check. Multiple credit checks made over a short period of time can lower your overall credit score and negatively impact the interest rate you pre-qualified for. Though you may not owe anything on the card at the time you apply for your mortgage, the possibility of creating additional credit card debt does factors in to the amount the bank will borrow you.
3. Do not make late payments. Falling behind on bills, whether it is for home heating, a credit card, student loan, or cell phone bill, can also bring down your credit score. The lender you choose to fund your mortgage will check your credit payment history. So it’s important to keep up with all your current financial obligations.
4. Do not change jobs. It’s best to avoid any changes to your employment status until after you have moved in to your new home. As your work history, length of time with an employer, qualifying income, and job stability are important factors when applying for a mortgage. Your chosen financial institution will need to verify your employment status to ensure that you are able to pay back your loan.
The best way to preserve your credit score, quoted interest rate, and ability to qualify for the home loan you budgeted for, is to simply maintain the same level of income and credit reporting between your “pre-approval” and “final mortgage application”. That way, when your ready to write the offer to buy your new home, your mortgage application will be on track for a quick approval.
If you’re ready to start the process of searching for your new home we are happy to chat!