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It's not always easy to get approved for a mortgage, so if you've managed to get the go-ahead for a home loan, congratulations! But don't get too comfortable just yet. There are certain moves you could make that could cause that deal to fall through. A lot can happen in the period between loan approval and actually finalizing the deal.
With that in mind, here are three major things to avoid until after you've closed on your mortgage.
1. Changing jobs
In addition to a strong credit score, your mortgage lender is going to want proof you have a steady job that pays enough to cover your mortgage payments. In fact, you can expect your lender to not only request a few months' worth of pay stubs from your current job, but also a letter from your employer stating that your job is in good standing. Your lender might instead reach out to your employer by phone for verification.
This is why it's not a great idea to get a new job mid-mortgage application. A different job may offer a comparable salary, or even a better one. But to your lender, it's an indication of potential instability. If you're offered a job you want to take while you're in the process of finalizing a mortgage, your best bet is to ask that employer to push your start date until after your home loan has closed.
2. Taking out a new loan
One factor your mortgage lender will consider when deciding whether to grant you a home loan is your debt-to-income ratio. This measures the amount of existing monthly debt you have relative to your income. The lower that ratio is, the more appealing a mortgage candidate you are. But if you take out another loan between now and your mortgage closing, it could drive your debt-to-income ratio into unfavorable territory. This could cause your lender to reconsider.
3. Taking a big withdrawal from your bank account
Your credit score, income/job status, and existing debt are not the only factors in getting approved for a mortgage. Your lender will also want to make sure you have enough assets to pay your mortgage in case you find yourself out of a job. As such, you'll generally be asked to provide your lender with a recent bank account statement. If you make a large withdrawal from savings to cover another purchase, it could compromise your mortgage.
Now to be clear, if you have $80,000 in savings, $40,000 of which will be your down payment, and you withdraw $2,000 to buy some furniture for your new home, it shouldn't be a problem. But a $25,000 withdrawal is a different story, so be careful in how you manage your assets until your loan goes through.
Many people mistakenly believe the loan is a done deal once they're approved for a mortgage. In reality, you should expect your mortgage lender to check up on your finances not only at the time of your application, but also right before your loan closes. As such, it's best not to make any major money moves until your loan is finalized.
