Even independent mortgage lenders may unapprove your loan because of something you do.
One of the smartest things you can do when you’re looking to buy a new home is to get pre-approved for a mortgage. Both banks and independent mortgage lenders issue pre-approvals. Zachery “Zack” Adam of Prime Mortgage Lending of West Asheville strongly encourages his clients to get approved for a mortgage even before you begin house hunting.
Getting pre-approved has a number of advantages. A preapproval for a mortgage loan:
- Lets you know exactly how much money the lender will let you borrow
- Makes a positive impression on sellers
- Gives you an edge when negotiating a price
The Smart Way to Buy a House
Preapproval differs from prequalification. Getting pre-qualified guarantees nothing and only gives you a dollar range that might be available to you. Getting pre-approved, on the other hand, provides the security and certainty that you have the means to buy the house you want.
Smart lenders, like independent mortgage lenders, prefer homebuyers who want to get pre-approved. Getting pre-approved does take some time, so start the process at the beginning, even before you look at any homes. You’ll need the same documentation you would to apply for a mortgage loan, but it’s a more intelligent way to go about buying a house — you know what you can afford as you shop.
Preapproval Isn’t Failsafe
Even if you get pre-approved for a certain amount, you may still not get the loan. Mortgages, even from conscientious independent mortgage lenders like Zack, are fragile instruments subject to wilting in the wrong light. Once you are pre-approved, you must tread lightly in all things financial.
Do not upset the apple cart. Do not upset your lender. And most importantly of all, follow the eight pieces of advice below. A small mistake may lead to you “accidentally” get your mortgage loan unapproved:
- Now that you’re serious about buying a new home, don’t miss any payments — on your credit cards, utilities, rent or mortgage. You have to wait a month or two from the time your offer is accepted to the date of your closing before you can afford any lapses. Anything that can lower your credit score may cause you to lose your pre-approved mortgage. Even a missed small payment can end up causing you to pay a higher interest rate than you had expected, raising your monthly payments.
- Don’t make any other large purchases before closing on your home. Be conservative with your funds until then. Don’t buy a new car, a new big-screen TV or a Hawaiian vacation. Don’t change your current leases. Whether you pay cash or use a credit card, a large purchase during this time may negatively impact your pre-approved mortgage.
- Independent mortgage lenders prefer that you sit tight on your credit cards. In addition to not adding significant debt by making a large purchase, you also should follow this financial advice:
- Don’t open any new credit card accounts.
- Don’t close any of your existing credit card accounts.
- Don’t pay off all of your cards.
- Don’t transfer balances between credit cards.
Banks and independent mortgage lenders rely on credit companies (Equifax, Experian and TransUnion) to calculate your credit score. The credit bureaus use a complex formula that includes your existing debt, the number of credit accounts and the length of your credit history. Don’t change anything, and you’ll make a seamless transition from pre-approval to approval.
- Manage your finances. Don’t move money around between financial institutions. Don’t deposit odd sums into your accounts that you can’t document. That includes gifts — if you receive a cash gift, complete the necessary documentation. Also, don’t cosign for any other loan during this time, even if it’s for your best friend, your employee or a member of your family.
- Most lenders, including independent mortgage lenders, require a stable existence of up to two years before you apply for a mortgage. That means you’ve held a consistent job in the same field or industry for two years. So, between the time you’re pre-approved and your mortgage officially closes, maintain the same job. Even moving to a new company for a better job can hurt your chances of closing on your loan.
- Minimize your financial risks. If you were thinking of starting a new business, wait until after you’ve closed on your house. If you’re thinking of cashing out your IRA or buying a bunch of new stocks, wait. If you do anything that involves financial risk, it will come back to your lender and could jeopardize your mortgage.
- Be upfront if you’re involved in a lawsuit. While this advice doesn’t apply to everyone, the point is: don’t keep legal or financial secrets from your lender. Even independent mortgage lenders want to know this. Foreclosures and bankruptcies are particularly harmful to your chances of closing on a new mortgage, but if you’re forthright, a reputable lender like Zack will work with you.
- The best escrow is a closed escrow. If you’re in that period, cooperate with your lender and real estate agent. Banks and independent mortgage lenders require your cooperation. Provide whatever they ask for in a timely manner. Sometimes additional documents are needed; sometimes your assistance can speed the process along.
While you should protect your rights when buying a house, work with your lender and your Realtor when they ask you for your help. If you do, then they’ll be more likely to help you when you need it most. Be courteous and helpful, and that’s how they’ll be in return.
Try Independent Mortgage Lenders
To get more information about how to protect your pre-approved mortgage loan, contact Zack or call him at 828-242-4780. Prime Mortgage Lending is one of those independent mortgage lenders who specialize only in mortgage products. They offer a wide range of mortgages, so they can find the best mortgage for your circumstances.