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My Mortgage Blog

Obtaining a mortgage pre-approval is often one of the early steps people take before they start shopping for a home. Indeed, it's a good idea to get a pre-approval so you can begin planning, budgeting, and deciding how much you can afford before you begin to look at houses. With a pre-approval in hand, you'll have a guaranteed interest rate and an idea of what your mortgage payments will look like. Even though pre-approval guarantees the interest rate offer from the lender, there is never any guarantee that the final mortgage application will be approved. So once you have your pre-approval, here are some things you should and should not do before you finalize your mortgage application.

Gather Your Documentation

Pre-approvals are quick and easy to get because they are based on assumptions and not verified facts. Your lender will want to verify your income and other financials before proceeding. Employees of companies can get a letter from their employer or show recent pay stubs as proof. However, self-employed people, contract workers and others without a 'traditional' source of income may need to produce financial statements or tax returns. These can take time to locate or prepare, so you can use the pre-approval time to do it.

Budget to Determine How Much You Can Actually Spend

The amount for which you have been pre-approved is not the amount you should plan to spend. It's probably more than you can truly afford. Instead, think of the pre-approved amount as a best-case scenario for mortgage lenders calculated from the income information you provided and your credit information. The numbers are plugged into a formula to calculate how much you could borrow if you had no other debts or expenses. But most people have plenty of other expenses, like childcare, transportation, gym memberships and fancy coffee addictions that eat into their disposable income. If you don't already have one, create a budget and figure out the amount you can spend on a mortgage and home carrying costs. 

Hold Off on Making Large Purchases

In the time between getting pre-approved and buying your new home, try to avoid making any purchases that will add to your debt load. This is not the time to buy a larger TV. The new appliances and furniture can wait until you are settled into your new home. Nor is it the time to book an expensive vacation. Keep your credit card balances low, or at least in line with your spending history, to avoid raising any flags for lenders. 

Avoid Applying for More Credit

New credit cards, car loans and even investment loans should be put on hold until your mortgage is finalized. Applying for additional credit makes you appear riskier to lenders who would like to be assured that your debt won't substantially increase. Even if that credit remains unused, it still appears as a potential flag for lenders.

Don't Change Jobs

This isn't always a situation you can control. However, while you have a pre-approval in hand, it's best not to change jobs if you can stay put. Strictly speaking, changing jobs isn't a strike against you, but it does speak to the stability of your employment. Lenders value stability, so show them that your employment situation is, in fact, stable. Of course, you still need to consider the long-term impact on your career, so don't turn down an opportunity to get closer to your professional goals! 

Mortgage pre-approvals are a convenient tool in the mortgage process for homebuyers and lenders. While you have a pre-approval in your pocket, try to ensure that your financial or employment status does not change dramatically before filing the formal application. A mortgage broker can help you with everything from getting pre-approval to gathering the proper documentation and finalizing your mortgage with the lender. The best mortgage broker won't stop working for you once the deal is done. In Niagara Falls, contact Dave DeStefano of The Mortgage Group to answer our questions and match you with the lender that best suits your financial needs.