Congratulations on taking a major step toward homeownership!
With your mortgage pre-approval, you are one step closer to buying your dream home.
But before you start the house-hunting process, it’s important to be aware of the dos and don’ts after your mortgage pre-approval.
This article will outline 11 essential points to remember to ensure a smooth and successful home-buying experience.
Following these guidelines can increase your chances of getting the best mortgage rate and closing your new home on time.
The Do’s After Getting Mortgage Pre-Approval
Start Your Home Search Early:
Now that you have received your mortgage pre-approval, it’s time to start actively searching for your new home.
It’s essential to keep in mind that your mortgage pre-approval is only valid for a limited time, typically 90 to 120 days.
During this period, the terms of your pre-approval are guaranteed. However, market conditions, interest rates, and policies can change, affecting your ability to afford the mortgage.
Therefore, starting your home search effortfully and within the pre-approval holding period is crucial to ensure the terms, including the rate, remain valid.
Save More Money During the House Hunting Process
Along with a down payment, you will also need to save for other expenses associated with buying a home, such as closing costs.
Typically, you must set aside 1% to 2% of the home’s purchase price to cover these costs, including lawyer fees, title search, title insurance, land transfer tax, and escrow and wire fees.
As you search for your dream home, it’s important to continue saving money or explore other financing options to ensure you have the funds necessary for a successful home purchase.
Educate Yourself About Mortgages
Understanding the differences between a mortgage loan and other types of loans, such as personal, car, and credit card loans, is crucial.
Familiarizing yourself with the various types of mortgages available in the market will help you decide and choose a mortgage that best suits your needs.
You should learn about the differences between a fixed-rate and a variable-rate mortgage, an open-term and a closed-term mortgage, a portable mortgage, an assumable mortgage, and more.
The approvU mortgage basics guide is a good place to start. If you have questions, your approvU Mortgage Experts can assist you via phone, chat, or email.
Reduce Your Debts Before You Buy a Home:
While searching for your dream home, take the opportunity to pay off or reduce your outstanding debts.
This can improve your debt-to-income ratios and increase your mortgage affordability.
Lowering your debts can secure a higher loan amount without increasing your income.
Additionally, this action can demonstrate your financial responsibility and improve your creditworthiness, making lenders more willing to offer you more money to buy your dream home.
Stay Informed and Update Your Information with approvU:
It is important to keep your approvU Mortgage Consultant informed of any changes in your financial situation, such as your income, employment, credit, and housing needs.
This helps ensure that the information used in your mortgage pre-approval remains accurate and up-to-date.
Regularly updating your information with approvU ensures that your mortgage process runs smoothly and you are well informed about your options.
Collect Required Documents:
Gathering all necessary income and identification documents is recommended during house-hunting to facilitate a quick and seamless mortgage approval and funding process.
To ensure your application is complete and accurate, you must provide documentation confirming your identity, income, down payment, and outstanding debts.
Our mortgage document checklists ensure you have all the necessary documents ready before beginning the mortgage application process.
Having all the required documents on hand can streamline the mortgage process and ensure a smoother experience.
Keep Making Regular Debt Payments:
It is important to remember that a mortgage pre-approval is not a commitment or guarantee that the lender will fund your home purchase.
It confirms that the lender is confident in your ability to secure the stated loan amount.
As such, it is important to continue making regular payments on your debts, even after receiving your mortgage pre-approval.
This demonstrates your financial responsibility and can help maintain your creditworthiness as you continue with the home-buying process.
Understand Your Mortgage Pre-Approval Details:
It is important to thoroughly review the terms of your mortgage pre-approval letter once you receive it.
Your pre-approval letter from approvU will provide important information.
This includes the maximum amount you can afford for a house based on your current income, the minimum down payment required, your loan classification, the pre-approved loan amount, and more.
This information will serve as a valuable guide as you begin your house-hunting journey, so ensure you fully understand the details and terms outlined in your pre-approval letter.
The Don’ts After Getting Mortgage Pre-Approval
Avoid Switching Jobs:
During the mortgage application process, it is recommended to maintain steady employment.
This is because many jobs have a 3-6 months probationary period.
Lenders prefer borrowers who have completed their probationary period or are likely to complete it before the close of the mortgage.
Steady and secure employment is important for lenders as it demonstrates your ability to maintain a stable income.
Even if you are moving to a higher-paying job, switching jobs during the mortgage process can still hurt your ability to purchase a house.
Avoid Applying for More Credit Products:
After receiving mortgage pre-approval, avoiding applying for new credit products, such as credit cards or personal loans, is vital.
This is because these new debts will affect your debt-to-income ratio, a key factor that lenders consider when determining your mortgage eligibility.
Additionally, each time you apply for new credit, it will result in a hard inquiry on your credit report, which can lower your credit score.
A lower credit score can make it more challenging to obtain a mortgage loan or result in higher interest rates.
To ensure the best chance of getting a mortgage loan, it is best to only apply for new credit products after your house purchase has been completed.
Avoid Making Major Purchases:
While preparing for your home purchase, it’s important to be mindful of your spending habits.
Avoid making any large purchases that may drain your savings or financial resources.
Instead, focus on conserving your funds for the necessary expenses associated with buying a home, such as the down payment, closing costs, and other associated fees. These can include expenses such as lawyer fees, title searches, registration fees, and more.
It may be tempting to buy furniture and appliances for your new home.
Still, it’s essential to keep these expenses in check and prioritize conserving your funds for the more pressing expenses of home ownership.
Obtaining a mortgage is a significant financial commitment, and being mindful of your spending is crucial.
Preparation is critical when buying a new home.
Being well-informed and knowledgeable ahead of time will greatly aid in making informed decisions and simplify the mortgage process.
Getting a mortgage pre-approval is a crucial part of the planning process.
Take your time, compare your options, and plan your finances accordingly.
By securing a mortgage pre-approval, you will have taken a vital step towards realizing your dream of home ownership and avoiding potential challenges in the future.