Eight things that will squash your mortgage (pre)approval

After you have been pre-approved, or even fully approved for a mortgage, you can still squash your approval before you get possession. In short, any major changes to your personal or financial situation can put your mortgage at risk.

Here are the most common pitfalls to avoid:

1. DON’T quit your work or change employers. Even if it is a better paying position, it will likely cancel your approval. When you change employers, 99% of the time they will require a probationary period. Your income does not count during this time.

2. DON’T become self-employed or accept a contract position. Even if you are doing the exact same thing as before, your income becomes invalid. Lenders view self-employment through a completely different lens and will want to see a 2 or 3-year earnings history. They also approve you on the net income, not gross income.

3. DON’T get a new vehicle. DON’T trade up to a more expensive payment. If your payments increase by $400 per month, you’ve just reduced your mortgage approval by $100,000.

4. DON’T make any changes to your credit. Don’t open new credit lines or credit cards. This includes those “buy now pay later” offers. More importantly, DON’T close out old credit cards or credit lines.

5. DON’T get into any disputes that will lead to collections. For example, unpaid parking tickets, cellphone/cable bills, utilities, etc. Pay these bills even though you are disputing them.

6. DON’T transfer large sums of money around. Don’t lend money and then have it put back into your bank account before funding. Lenders have an obligation to ensure there isn’t any money laundering going on and these transactions make them suspicious. Even if that’s not the case, it could look like you have borrowed money for your down payment, which could kill your approval. If you are receiving a gift, there is a proper way to document it.

7. DON’T forget to disclose everything. Perhaps you have forgotten that you are a co-signer on another property. Maybe you’ve been divorced for years and have agreed that you don’t owe each other a thing, but that pesky separation agreement still says otherwise.

8. DON’T go on vacation before your mortgage closes. There could be last minute things that will be required. Or perhaps you may run into a situation where you can’t get back in time. Expect the unexpected. Don’t risk it.

While not everything on this list will absolutely squash your approval, it just makes the approval process harder and a lot more stressful at a time when you are probably already stressed enough. If you are thinking about making any changes, give me a call so that we can make sure you avoid any of the pitfalls above.

Written by Mortgage specialist Vy Tri Truong