Buying a home can be a reason for excitement, but that is no excuse for neglecting your finances. This is a mistake many prospective home buyers often commit. They may have a pre-approved home loan, but they often forget that they will have to pay their bills and keep creditors away until and after their loan settlement date.
Most loan preapproval letters are valid for a period of 90 days. However, if during these 90 days your financial situation changes for the worse, it could affect the preapproval.
Let’s look at the 9 things you must not do after getting a loan preapproved:
1. Do not apply for another loan
Mortgage lenders make a second assessment of your financial situation before they issue the final loan sanction letter. And hence borrowers are advised against applying for new credit after they get a loan pre-approved. Applying for new credit will affect your credit score. Consequently the bank will need to readjust your interest rates. This may delay the settlement.
2. Don’t go on a shopping spree
Shopping is fine, but as far as possible avoid making major purchases with credit because it can affect your credit score. Making major purchases by paying cash is not recommended either. It will reduce your cash reserves and affect your ability to make a down payment.
3. Do not pay off your existing debts in a hurry
Every transaction that involves money has an impact on your pre-approval and hence it makes sense to consult your bank before doing anything. Some borrowers try to pay off all their debt before they get their home loan disbursed. However, this is not recommended because it can deplete your cash reserves.
4. Do not co-sign loans
Don’t commit the mistake of co-signing a new loan. Borrowers often think that co-signing an automobile or a student loan will have no impact on their credit score. But in reality, if you co-sign a loan, it is considered a liability for both signers.
5. Do not change jobs
As far as possible avoid changing jobs after getting a preapproval. Even if you get a very good offer, it makes sense to wait until the loan amount is disbursed. If you change jobs immediately after you get a preapproval, your lender will want to verify the nature of your new employment. They may also ask you to submit one or two salary slips. All of these will unnecessarily delay your settlement.
6. Don’t ignore the lender’s requests for documents
Submit all documents your lender needs as soon as possible. Ignoring lender requests will delay your settlement.
7. Don’t forget to pay your bills on time.
Pay your bills on time. You must also ensure that you do not have an overdraft on any of your existing accounts. If your payments are usually billed to your credit card, you don’t necessarily have to change that practice.
8. Don’t forget to document your deposits
Accumulating assets is not a problem; however you must document everything. The lender might ask you to submit documentation of any new deposits.
9. Don’t forget to discuss seller concessions with the bank
Stay in close contact with the lender throughout the whole process. If you receive seller concessions, don’t forget to inform the bank.
Steer clear of these 9 mistakes and you will be able to avoid most financial problems related to home buying!