You have a Mortgage Preapproval. Now what?

Mortgage Alliance Advance Mortgage

You Have A Mortgage Preapproval! Now What?

Most people are aware that getting a mortgage preapproval should be your first step when considering buying a home. A preapproval lets you know if you qualify under your current circumstances. It also tells you how high of a home price you can be shopping for. It is an essential part of the process that will help you avoid surprises when you find a home you want to buy. So you call your favourite mortgage brokers (us 😉 ) and guess what?

You get Preapproved!

You did all the right things and you get your preapproval. Now you are qualified for the amount you want to borrow. From this point you can work with your realtor or find a realtor to help you get started. Your realtor is familiar with the area you want to buy in and once they know what you are looking for can help you narrow down the options so you only spend time looking at houses that reasonably match your must haves and your budget! But for some people this process of finding the right house can take some time. No one wants to rush into a house that they don’t truly want to buy. What happens with your pre approval during this time period? Does it expire? Will it still be applicable in the event of any changes?

How to keep your mortgage preapproval valid

Sometimes there is a gap of time from the day of your preapproval to the time you find a home to buy. This can end up being quite a lengthy amount of time as you try to find the right home. What happens with your pre-approval if it takes a long time between qualifying and actually buying? We always tell our clients that your pre-approval should remain valid as long as nothing changes with your situation. The minute something changes is when your pre-approval can be affected. It is important if you have changes that you let your broker know. We can update your application and find out if the change has impacted your mortgage pre-approval and what that impact is. Although not all changes will be in your control their are definitely some that are!

What not to do after you have been preapproved for a Mortgage

These are some of the things that we recommend not doing after you have a mortgage preapproval.

  1. Do not take out any new financing.  

    Especially large loans. Buying a new vehicle can come with a hefty payment. Depending on your personal circumstances this new payment can be detrimental to getting financing. Either way it will reduce your qualifying amount which may put you in a price point you are no longer happy with. If you absolutely must have the new vehicle and you need financing we suggest discussing with your broker what the new loan amount will be. We can run the numbers and make sure that it wont have a negative impact on your home buying goals. If it does then you will know in advance and can proceed based on what is most important to you!

  2. Don’t accumulate new high balances on credit cards.

    When we determine whether a potential homebuyer qualifies for a mortgage one thing we are looking at is the debt to income ratio. That is how much of your income goes towards paying monthly debts. This is affected by loans, as mentioned above, but is also affected by Credit card debt. If when you qualify you had no balance owing on your credit card but when you go to buy you now owe 5000, that is going to have an impact on your qualification. Additionally, it will also impact your credit score if you are carrying high balances on credit cards or lines of credits. We recommend keeping balances low or consistent with what they were at when you initially qualified.

  3. Don’t make any significant changes to employment (if you can help it).

    A  mortgage preapproval is based on your income and employment at the time of application. If you make a change to your employment this can have an affect on your preapproval. For example, if you are an employee of a company but you decide you want to go out on your own in the same line of work but now as a self employed contractor this changes the circumstances of your qualification. A self employed person has different qualification requirements than an employee. We do understand that sometimes changes to your employment are beyond your control. If you do change employment or are thinking about changing employment please speak with your broker to find out how it affects your mortgage preapproval before writing an offer on any home. This helps avoid unpleasant surprises and keeps you informed of your qualification status.

  4. Make sure you are following the rules when it comes to down payment.   

    If you do not know all the mortgage rules when it comes to down payments that is okay! That is where we come in. When you get your preapproval we will ask where your down payment is coming from. Whether you have saved it up yourself, are getting a gift from a family member or want to borrow your down payment is information we need to have when qualifying you. Changing the source of your down payment from your original plan can impact your qualification. We should be advised of any changes to the source prior to buying to make sure it still works for your situation. If you are supplying down payment from your own savings lenders will ask to verify those funds have been in your possession over the past 90 days. Any large deposits and the lender will want proof of where those funds came from. If you have any large deposits in the 90 days preceding your purchase make sure you keep documentation of where those funds came from.  Be ready to provide that documentation!

Overall it is best not to make any changes if you can help it but the above items will have the greatest impact if you do. Although doing any of the above will not necessarily mean you will no longer qualify. Everyone’s situation is different and that is why having a trusted mortgage professional to guide you through the process is the best choice to make. We are always available to our clients to offer advice and guidance tailored to your specific circumstances.

Happy House Hunting!

-Jessica Kriekle, Mortgage Associate, Mortgage Alliance Advance Mortgage

Jessica Kriekle Mortgage Professional