I think most of us know that we must continue to pay our bills, even after receiving a loan pre approval letter from a lender, but many people assume that the lender has approved them and start neglecting their finances.
#1Generally, a pre-approval letter is valid for 90 days after you receive it. Most have a disclaimer that if anything changes before the settlement, it could impact your pre-approval. After 90 days most lender will issure you a renewal letter, after checking your finances again, and doing another credit check.
#2 DON’T MAKE ANY MAJOR PURCHASES.
When you buy furniture or appliances with credit, your lender will have to factor in the added new payments to your debt to income ratio, which might result in a cancelled or delayed loan settlement. If you pay cash, will you still have the money for the down payment, and any cash reserves?
#3 DO NOT PAY OFF ALL OF YOUR DEBT.
After getting a pre- approval letter, every move you make with your money will have an impact, so consult with your lender before doing anything. Even if you pay off your credit card debt, it can hurt you if you close out your account or reduce your cash reserves. We’ll also need to know where the money came from to pay off the debt.
#4 DO NOT CO-SIGN ANY LOANS FOR ANYONE.
Borrowers sometimes assume that co-signing a student loan or a car loan won’t affect their credit, but it is considered a new debt for both signers, especially when its a new loan. Most lenders will require at least 12 months of cancelled checks that show only the co-signer is paying the new loan. Payments made against the new loan will also have to be calculated as part of your debt to income ratio.
#5 DON’T CHANGE JOBS.
Try not to change jobs after getting a pre-approval letter. Even if it seems like a great move to you, a lender will have to re-verify you employment and you may have to provide one or two pay stubs, which will delay the settlement.
#6 DON’T DELAY ANY REQUESTS FROM THE LENDER.
If the lender recommends something you need to do,or provide, follow their directions and do it, ASAP. Always provide requested documents as soon as the lender asks for them. If you delay providing any requested item, it will delay the closing of the loan, or settlement.
#7 STAY CURRENT ON ALL EXISTING ACCOUNTS.
Continue to pay all of your bills on time and make sure that you don’t incure an overdraft on any account. If you make payments on some accounts with automatic billing to a credit card, do not change the procedure. Your preapproval is a snapshot in time, and you want to make sure that your finances stay as close to that snapshot as possible.
#8 KEEP RECEIPTS and GOOD RECORDS OF ALL DEPOSITS.
You may have to provide additional records and receipts, or complete documentation of any deposits other than your usual paycheck information. You must document everything. You must be proactive and contact your lender if you recieve a bonus, or other income, even certificates of deposit if you consolidate your assets. A good lender can advise you on what you will need for a good paper trail. The same if you are receiving any gift funds, you must provide a gift letter from the donor.
#9 DISCUSS THE SELLERS CONCESSIONS.
If you are going to ask the seller for any concessions, the lender needs to know the details. They must be factored into the loan approval. Even in a sellers market, sometimes there is opportunity to negotiate help with the closing costs, for example. Keep the lender up to date on anything that may change the pre-approval you have received from the lender.
You need to discuss everything with your lender and stay in constant contact throughout the entire loan process.
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