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5 Activities to Avoid Between Mortgage Pre-Approval and Closing

Congratulations, your mortgage has been pre-approved! It’s natural to feel anxious and maybe even be itching to find ways to ensure that final approval goes through. When it comes to your financial picture and credit profile, however, it is best to leave things alone as much as possible between pre-approval and final closing. Any big changes will need to be accounted for and may delay closing, or even result in your loan being denied. The following are some common mistakes that you should avoid while waiting for your mortgage loan to be approved.

Someone entering credit card information into a laptop

Don’t take on any new debt

You may think that it’s safe to apply for new credit once your pre-approval goes through, but the final approval process will check your credit for a second time. New accounts, and the hard credit checks needed to open them, both drop your credit score temporarily. This includes not only standard credit cards but any department store cards, “buy now pay later” offers, or other loans (including co-signing for someone else).

Don’t make unusual bank deposits…

It may seem like the more cash in your accounts, the better your odds at final approval. While larger assets, including cash, can positively affect your mortgage loan, there are very specific rules for documenting where that money comes from. Money that comes as a gift from family, for instance, requires a letter confirming it as a gift. Talk to your loan officer before making any deposits that fall outside of your normal banking patterns

… Or withdrawals or purchases

Maybe your pre-approval made you realize that your credit is actually better than you thought. Perhaps the home buying process has you itching to start buying furniture or other big ticket items for that house. Whatever your motivation, stop and be patient. Your mortgage pre-approval was based on set criteria, including the amount of available funds available across your accounts. Reducing that number could hurt your chances at final approval. If you absolutely have to make a large withdrawal or purchase, talk to your loan officer first to figure out the best way to go about it.

Don’t pay off charges or collections

You might think that paying off collections could only help your chances at final approval, but it is best not to change your credit profile and credit score in any way between pre-approval and closing. Derogatories on your account might not be hurting your credit score as much as you think, but a tiny mistake in paying them off could cause your credit to tank.

Don’t change or open new bank accounts

When your lender looks at your finances, they need to have a clear picture of where all of your money is coming from. To do this, most require that your bank accounts be open for a minimum of two months. Adding or switching a bank account could potentially set your mortgage application back 60 days until the new account reaches that two month threshold.

Bottom line – Don’t make any big financial changes between your mortgage pre-approval and final closing. Even a small mistake could set back the approval process and require you to provide new documentation. If a change to your finances is unavoidable, talk to your mortgage loan officer as soon as possible to figure out the best way to go about it without harming your application.

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