Congratulations! You’ve taken the first step towards homeownership by getting pre-qualified for a mortgage. This exciting milestone brings you closer to securing the funds you need to buy your dream home. However, it’s important to remember that the pre-qualification process is just the beginning.
Congratulations! You’ve taken the first step towards homeownership by getting pre-qualified for a mortgage. This exciting milestone brings you closer to securing the funds you need to buy your dream home. However, it’s important to remember that the pre-qualification process is just the beginning. To ensure a smooth path to homeownership, there are several dos and don’ts you should keep in mind after getting pre-qualified. In this blog post, we’ll guide you through the essential steps to take and the potential pitfalls to avoid.
Pre-Qualified for a mortgage? Don’t:
Apply for a new credit card—or max out the ones you have
After getting pre-qualified, avoid making significant financial changes that could impact your creditworthiness. This includes taking on new debts, opening new lines of credit, or making large purchases on credit. Lenders review your financial history and credit score during the mortgage approval process, so it’s crucial to maintain stability.
Besides, if you’re in a position where you need to use credit cards to make ends meet, you may not be in the very best financial shape for homeownership in the first place. If there’s one thing you can count on during this process, it’s that unexpected expenses will arise.
Pay off debt
Yes, this one sounds super backwards—but hear us out. The name of the game at this critical moment is stasis, and even positive financial behaviors can have negative effects on your eligibility in the short run.
For example, if paying off debt means you’ll eat into the cash reserves you were going to use for a down payment, that could be a problem. Most lenders require the money you spend up front to be seasoned—which is to say, to have languished for a certain amount of time in your bank account (usually a month or two). Even if you’re planning to use gift funds for a down payment, cutting down on your overall savings can leave less funding available for upgrades, repairs, and maintenance once you’ve closed.
And if you’ve already recently paid down some debt, good work—but whatever you do, don’t close your credit accounts, even if they’re at a $0 balance. Available, unused credit is an important metric in calculating your credit score, and closing an account can drastically change the ratio (and therefore pull you down a point or ten). This can change the interest rate you receive on your mortgage loan—or, in extreme cases, jeopardize your loan approval entirely.
Keep in mind that this rule only applies if you’ve already started the mortgage application process and have achieved prequalification. If you’ve yet to apply for a home loan, paying down debt is a great idea. Doing so can make it easier to meet your monthly payments and will also lower your debt-to-income ratio (DTI).
Change your job
This, of course, may not be entirely under your control—but if at all possible, don’t change jobs midway through the home lending process. Lenders are interested not only in the cash you have in hand now, but in the money you’ll earn in the future. After all, you’ll need steady earnings to pay off that six-figure sum over the course of a decade or longer.
Even if you’re offered a better position at a new firm, it might behoove you to wait until after you’ve schlepped your last moving boxes. Your loan officer or underwriter, along with tax returns and bank statements, will need at least one, and possibly two, pay stubs to verify your new gig, and waiting for those paydays might delay your final approval.
Review your budget
Before proceeding further, take a close look at your finances. Evaluate your income, expenses, and overall financial situation to determine a realistic budget for your new home. Remember to factor in additional costs like property taxes, insurance, and maintenance expenses. Knowing your financial boundaries will help you make informed decisions about the type and size of the home you can afford.
Even if you’ve been pre-qualified for a mortgage, it’s crucial to maintain or even increase your savings. Having a robust savings account will give you a sense of financial security and can help cover unexpected expenses that may arise during the homebuying process or after moving into your new home.
Keep your financial records organized
Stay organized by keeping all your financial documents in one place. This includes pay stubs, bank statements, tax returns, and any other relevant paperwork. Having these documents readily available will make the mortgage application process smoother, should you decide to move forward with a particular lender.
Looking for a mortgage lender who will walk you through the home-buying process every step of the way? Look no further. Quontic offers a variety of loan programs built to suit a wide variety of borrowers, from FHA and VA loans to conventional mortgages and more. Quontic offers great loan options for borrowers who are self-employed, working the gig economy, or otherwise don’t necessarily have the same kind of paperwork available as a traditional W-2 worker. Whether you’re a first-time home buyer, investor, or a current homeowner looking to refinance, contact us today to learn more—and get started on your own path to getting pre-qualified.