What NOT To Do Once You Are Pre-Approved!

What NOT To Do Once You Are Pre-Approved

So often agents are putting the focus on coaching their clients how to get pre-approved, what they can do once you are pre-approved, or about the homebuying process that they aren't discussing what NOT to do once you are pre-approved. With the current market and the sheer competitiveness of being a homebuyer in 2021, we want to make sure our current and future clients are educated not only on what happens after pre-approval but how to ensure they are making the best decisions and don't risk losing out on buying their dream home! 

So you just pre-approved, CONGRATULATIONS!! This is one of the MANY exciting steps in the homebuying process! Now we can being to search listings, and set appointments to find THE ONE. But here are a list of things you SHOULD NOT do once getting that beautiful pre-approval letter in your hands. 

1. Gift Funds - Your lender may have had a discussion with you about gift funds, and what this means for you as a buyer. If they haven't then you NEED to! Do NOT have relatives deposit "gift funds" directly into your account. It is better to have these deposited directly to the escrow account. If they are deposited directly into your personal account, then your lender may request statements from you donor in order to show a paper trail in the transaction. 

2. Large Deposits - Do NOT make large deposits that cannot be explained, again you must have a paper trail showing where the funds are coming from. Any large deposits that cannot be accounted for can render an entire bank account invalid and unusable for qualifying. If you NEED to make a large deposit, contact your lender or loan officer for coaching on the best way to do this.

3. Do NOT take on new debt. This is another VERY important topic, and most agents have encountered this situation once or twice in their career. If you increase credit card balances, or finance a vehicle or other large purchases, your debt ratios will adversely be impacted. Thus ultimately reducing your maximum purchase price, which can cause problems if you are already under contract on a property. 

4. Hourly Pay - Do NOT take days off if you are paid hourly. If your debt ratios are already on the higher end, then even just 2-3 days could knock you out of your qualifying range. 

5. Do NOT spend liquid assets. Pre-approval software relies on specific liquid asset levels, pre-approval amounts can change if liquid assets are significantly reduced.

6. Monthly Debt Payments - Do NOT miss payments on any debts reporting on a credit report. Even though this is more obvious we like to remind buyers that missing monthly payments can sharply reduce their credit score and qualification amounts. 

7. Co-signing - Do NOT co-sign for someone else's debts. Even if you are just a "co-signer", the debt will pull up on your credit report. You will be responsible for the debt and payments. If you have already co-signed for someone, talk to your lender or loan officer on tips about how they can get this off of your credit. 

8. Taxes - Do NOT file taxes with a tax liability owing, or with less income than previous years. This is most important for self-employed borrowers, particularly during tax season. Qualifying income is typically determined with the most recent filed tax returns, and must prove that all tax liabilities are paid off.

9. Business Accounts - Do NOT make transfers from business accounts, as they are more carefully scrutinized than personal accounts. If any large transfers are traced back to business funds, additional documentation will be needed and additional requirements must be met. 

We know that there are so many pieces when it comes to purchasing a home, and it is a top priority of The Laura Smith Real Estate Team to provide the skills and knowledge for homebuyers to be prepared for everything the process involves. We strongly encourage you to ask questions about topics you are unsure of, most always your lender and agent want what is best for you and can get you the help you need!