Welcome to one of the many mistakes people make after they’ve been given the pre-approval letter. Too many home buyers feel like their pre-approval is like a “get out of jail free” card in the game of Monopoly. In their mind, they have already been approved for $200,000 to purchase a home so their credit must be good enough for them to go ahead and buy that furniture, or even something as small as the riding lawn mower. If you buy it on revolving credit, you have just put your loan and your rate in jeopardy. Maybe you think it’s a time to help their kids with their college loans. Maybe you think that since you got so much credit, why not go ahead and apply for one or two more credit cards to help with those new home items they will need.
All along they feel like “Well, I’ve already been given their approval and the green light for a home loan, now I will use my good credit for other purchases.”
Others may say “Well, now that I’ve been given a clean bill of credit health, it won’t hurt to incur a late fee or miss a payment on a credit card.
ALL OF THE ABOVE AND ANY SITUATIONS THAT ARE SIMILAR ARE DEAD WRONG!
Earlier in this article and many times on the Saving Thousands Radio Shows it’s pointed out that your pre-approval is based totally on all of the information that has been inspected by the underwriting team on the date of the pre-approval letter. It has also been pointed out that prior to the official closing of the real estate transaction that the mortgage company will again go back to each and every document and credit score to make sure that nothing has changed.
This includes opening any new credit lines; any changes in job status; any unusual transactions in your bank accounts and more.
Let’s say for instance that a last-minute inspection of your checking account shows a sudden deposit of $15,000 to $20,000. All along you may have planned on using that money as part of your down payment but did not mention it to the mortgage company. For whatever reason you made that choice, it makes a great difference in the final makeup of the loan. Had the lender been informed of your plans there would be ways to still make the loan work. However, when things like this pop up at the last minute, most likely there will be problems and perhaps the closing may be delayed if not canceled for good.
Likewise, if a last-minute check on your credit shows a revolving charge for furniture or a new car that could change the income to debt ratio which could possibly nix your loan.
Therefore the answer is a flat, no.
In addition, make every effort between the loan application and the closing to be very open and forthright with your mortgage company. Again this is not an adversarial relationship. Keeping the mortgage officer informed will allow them to use their education and training to assure you a smooth process all the way through the closing to you using your new keys to open your new house.
