6 Things To Avoid While Waiting For A Mortgage Approval

February 21st, 2008 - - filed in Mortgage Educational Information

When buying a home, there are two stages in the home loan approval process.

Stage 1 starts when a homebuyer submits a mortgage application to his loan officer for a pre-approval.

A pre-approval is a “walk-through” mortgage approval that says — at a given purchase price and downpayment amount — the home loan application will very likely be approved.

Stage 1 ends when the buyer signs a purchase contract on a home. At this point, the “walk-through” approval is useless because the buyer now needs a real home loan approval from an underwriter and not a loan officer.

Thus begins Stage 2.

During the second phase of the approval process, a mortgage underwriter is reviewing income, assets, credit, job history, and other items, too; the underwriters job is to make sure that the buyer meets the bank’s criteria for lending.

If the loan officer did his job in Stage 1, Stage 2 is just a formality. And most times, it all goes according to plan.

Occasionally, though, a homebuyer sabotages his own mortgage approval by inadvertently changing his “risk profile”. It doesn’t happen on purpose, of course — it just happens.

So, consider this a quick primer of what not to do while you’re between Stage 1 and the completion of Stage 2 of the home loan approval process. Following these pointers will help keep the risk profile consistent.

Don’t buy a new car (or take on a larger lease payment)
Don’t quit your job or change industries (and certainly don’t switch to a heavily commissioned role)
Don’t transfer large sums of money into or out from your bank accounts (and remember that “large” is relative)
Don’t miss a payment to a creditor (even if you don’t think you owe it)
Don’t open a new credit card (even if you’re getting 10% off your new bedding)
Don’t accept a cash gift without talking to your loan officer first (because there’s rules on how to accept them)

There’s other items, too, but this a good start.

Now, avoiding these mistakes may not be practical for everyone. Therefore, if you know you’re going to violate a “rule”, check with Tyler Ford or Todd Abelson first.

There are a lot of “gotchas” in mortgage lending and it helps to have professional guidance for your individual questions.