The Do’s and Don’ts After Mortgage Preapproval

Getting preapproved for a mortgage is an exciting and important step in the homebuying process. It shows that you’re serious about purchasing a home and gives you a good idea of how much you can afford. However, always remember that the preapproval is not a guarantee of a loan, and there are several do’s and don’ts to keep in mind after receiving your preapproval letter.

The Do’s

Do Keep Your Finances Stable

After getting preapproved, you want to keep your financial situation stable. This means avoiding large purchases or opening new lines of credit, as this could affect your credit score and debt-to-income ratio, both of which are important to the final loan approval. According to Experian, one of the major credit reporting agencies, your debt-to-income ratio should ideally be below 43% to demonstrate your ability to handle mortgage payments.

Do Stay Employed

Lenders will want to see consistent employment and income during the application process. Changing jobs or leaving the workforce altogether can raise red flags for lenders and may affect your loan approval. According to data from the United States Bureau of Labor Statistics, the average duration of unemployment is around 21 weeks. Therefore, maintaining stable employment throughout the homebuying process is crucial.

Do Communicate with Your Lender

Whether it’s a change in your financial situation or a question about the next steps in the process, it’s important to maintain open communication with your lender. They are there to help guide you through the process and address any concerns or changes that may arise. According to a survey conducted by J.D. Power, borrowers who communicate proactively with their lender during the mortgage process had higher customer satisfaction scores.

Do Continue Saving

While getting preapproved means you’ve taken a significant step towards homeownership, it’s still important to continue saving for the down payment, closing costs, and any unexpected expenses that may arise during the homebuying process. According to the National Association of Realtors, the median down payment for first-time homebuyers in 2023 was 8%, while repeat buyers put down a median of 19%.

Do Keep Up with Your Payments

Paying bills on time and keeping a good credit score is essential during the mortgage process. Missing payments or letting your credit score drop could jeopardize your final loan approval. According to FICO, the company responsible for calculating credit scores, payment history accounts for 35% of your credit score.

The Don’ts

Don’t Make Major Financial Changes

Avoid making large purchases, taking out new loans, or making any significant financial changes during the preapproval process. These actions could affect your creditworthiness and financial stability in the eyes of the lender.

Don’t Change Banks or Move Money

Changing banks or moving money around between accounts can make it difficult for the lender to track your financial history and could raise concerns about the source of your funds. Your lender will want to see a consistent financial history to ensure your ability to meet mortgage payments.

Don’t Co-Sign for Other Loans

Co-signing for another loan can impact your debt-to-income ratio and financial stability, potentially affecting your final loan approval. According to data from the Federal Reserve, around 75% of co-signed loans are for auto financing, and co-signing for a loan could make it harder for you to qualify for a mortgage.

Don’t Change Jobs

Stability and consistency in your employment situation are important to lenders. Changing jobs during the mortgage process can raise concerns and may affect your loan approval. According to a study by the Bureau of Labor Statistics, the average person holds 12 jobs during their working years. However, when it comes to the mortgage process, stability is key.

Don’t Skip Payments

Missing payments on existing loans or credit lines can negatively impact your credit score and raise red flags for lenders. According to Experian, missing a payment on a mortgage, credit card, or other installment loans can significantly decrease your credit score.

Remember, a mortgage preapproval is not a guarantee of a loan, and lenders will continue to review your financial situation before final approval. By following the do’s and don’ts and considering Embrace Home Loans® with our unique preapproval programs, homebuyers can have confidence and feel secure the financing needed to purchase their dream home.

Discover Our Unique Preapproval Programs

When it comes to obtaining a mortgage preapproval, Embrace Home Loans offers unique programs to cater to the individual needs of homebuyers. Our expert loan officers work closely with clients to provide personalized guidance and support throughout the preapproval process.

We also understand the importance of clear communication and keeping clients informed every step of the way, making the preapproval process as transparent and stress-free as possible.

In addition to traditional preapproval programs, we offer two new innovative options. we’ve introduced our Property Value Certificate and Approved to Close Backup Cash Guarantee.

When you have a Property Value Certificate, the seller knows that the value on your purchase offer is certified — and you can choose to waive the appraisal contingency! So any worries that you or the seller may have about the value vanish into thin air.

When you offer the seller our Approved to Close Backup Cash Guarantee, you can choose to waive both the financing and appraisal contingencies and give the seller a backup cash guarantee.

This makes your offer even better than a cash offer! Give your local office a call today and see how we can help you from offer to closing.