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Mortgage Approval is NOT Set in Stone

Posted By Paula Henry on Friday, October 22, 2010 12:33:00 PM | 7 Comments

You've found the Indianapolis home you want to buy and have been approved for a mortgage. Congratulations! You are on your way to being a homeowner. Now that you have approval, make sure you don't do anything to sabotage it.

Since there may be 60 days between the application date and the closing date, it's important for applicants to remember that mortgage approvals can be revoked at any time prior to funding. There may be last minute verification of employment or an updated credit report run before final approval. As mortgage applicants, there are many events that are out of your control -- job security and health matters, for example. But there are also events that are within your control.

Knowing that mortgage approvals can be fragile, here are 8 things you should absolutely not do while your home loan is in process. It may be the difference between being approved by the bank, and being turned down.

Don't buy a new car or trade-up to a bigger lease.
Don't quit your job to change industries
Don't switch from a salaried job to a heavily-commissioned job
Don't transfer large sums of money between bank accounts
Don't forget to pay your bills -- even the ones in dispute
Don't open new credit cards -- even if you're getting 20% off
Don't accept a cash gift without filing the proper 'gift' paperwork
Don't make random, undocumented deposits into your bank account

Now, avoiding these items may not be practical for everyone. For example, if your car lease is expiring and you need a larger vehicle, it doesn't mean you can't buy the car -- just check with your loan officer first to be sure the new payments won't 'break' your approval.

The same goes for accepting cash gifts from parents. There's a right way and a wrong way to accept gifts and doing it the wrong way may prevent you from using the gift as a source of down payment.

Mortgage lending is full of 'gotchas' - so my advice to my clients is not to buy anything you don't need while waiting to close on your new home.

Discussion

#1 Posted by Patsy Snyder at 5/9/2009 1:27 PM

Excellent advice and lenders and Realtors should make sure that their clients/cutomers understand these "no-no" scenarios.

#2 Posted by Realtor in Bucks County at 5/16/2009 5:19 PM

Great post! These are the basics that every buyer's agent should explain to their buyers.

#3 Posted by Brad-Bakersfield, CA Homes for sale at 5/27/2009 3:49 AM

Nice Job! I don't know how many times I've heard of buyers messing up their home loan by making changes such as buying a car in the middle of their real estate loan application. It happens a lot.

#4 Posted by Ashley at 5/23/2011 2:41 PM

This is unfortunately a common mistake amongst many homebuyers. This hurts all parties when the approval is revoked- it's a good reminder too, to help our buyers understand this principle during the whole homebuying process, until closing has occurred and they are ready to move in. One thing at a time! Patience! That's what agents are there for-to help a homebuyer understand the do's and don'ts in homebuying. Thanks for your article even if it was a long time ago- the principles still hold true.

#5 Posted by Scarlett Neal at 5/25/2011 2:12 PM

These days, nothing is closed until its all said and done. I have had lenders want to back out AFTER CLOSING! This is unacceptable. Being an Agent is getting harder and harder and its our necks in the ringer if the Buyer looses earnest money, unfortunately.

#6 Posted by Hamid Grinage at 7/22/2011 9:43 AM

It's amazing how many potential buyers don't really understand how the financing process works, this is a great article that should be read by anyone who's in the market!

#7 Posted by Mitchell @ Idaho Real Estate at 8/4/2011 9:36 AM

Everyone and anyone looking to get a home should know these rules beforehand. Many do believe the mortgage to be set in stone. Your blog helps to show how fragile they really are. I'll be sure to recommend this blog to any looking to buy a home.