If you are currently preappoved for a mortgage to buy a home or are considering getting a mortgage in the New Year, what you do now with regards to your credit and income may impact your preapproval status.
A mortgage preapproval is based on information provided at the time of the pre-application. It is only valid assuming that the information provided at that time has not changed. You may not be aware that you’ve done something that may have jeopardized your preapproval until a month or two later when you’re getting ready to make an offer on a home and then learn you’ve been Scrooged.
Here are some tips, before black Friday and all the other pre-post holiday shopping days that I hope you find useful to protect your mortgage preapproval.
Do NOT apply for new credit. It doesn’t matter if it’s “same as cash” or “zero interest” or if the salesperson says, “this won’t impact your credit report.” Run run, Rudolph away from adding new credit to your profile. Not only will your lender have to factor the new credit into your debt to income ratios, inquiries and new credit will lower your credit scores, possibly causing you to no longer qualify for a lower rate or even worse, lose your preapproval.
NOTE: This includes staying away from buying that new car so you can put a big bow on it in the driveway for the holidays. Sugar plum kiss your credit score good by with the addition of the new debt.
Try not to over use your existing cards. Not only will you have to be requalified at the higher credit card payment, your scores may take a hit if your cards are used over 30% of the available credit limit. They’re hit again if you exceed 50% of the credit limit and really whammo’d if you go over your credit limit.
Don’t blow your savings. If you need savings for your down payment, closing cost or to show that you have extra reserves at closing, don’t blow it on presents. Friends and family will understand that you’re saving up to buy a home. Make a budget, plan your gifts and avoid impulse shopping.
Need help with will-power? Clip out a photo of the home you’re hoping for and put it in your wallet near your credit cards.
Keep documentation of any monetary gifts. If your rich Uncle Ebenezer decides to give you money, make sure you keep a paper trail. You’ll need to make copies of the check and your Uncle may need to sign a gift letter and possible prove he had the funds the to give you. Remember, large deposits may have to be documented and explained to the lender.
Questions? Ask your local mortgage professional or post them here. If I can help you with your mortgage for your purchase or refinance of a home located anywhere in Washington state, please contact me.