Got pre-approved for a loan? Great! Now freeze. Don’t move. That is, don’t blow it now!
Homebuyers sometimes begin feeling rather smug and complacent after their loan is pre-approved, thinking they can go on autopilot until their find their home. Okay, so a solid loan pre-approval with no conditions is a fairly safe bet that everything will sail smoothly, but it certainly is no guarantee.
During the months you are trudging through homes, making offers and packing boxes, there are a number of factors that can affect the viability of your pre-approval. Most of these factors and responsibilities sit squarely on YOUR shoulders. Issues buyers (borrowers) should focus on after loan pre-approval may include the following:
· Changing jobs: Buyers represent themselves as being employed in a particular line of work at a particular rate of pay, even offering the lender promises of salary bonuses or future commissions during the escrow process. This may all look great to the lender, with verifications received from the homebuyer's employer of all of the above. The danger here is in making a change after the fact. Many lenders agree that borrowers should show at least two years' stable employment history with their employer, and if they must change jobs, they should stay in the same line of work, have no gaps in employment whatsoever, and leave only for a higher rate of pay. If bonuses and predicted overtime are forfeited (they were never guaranteed to begin with) due to a change of this kind in employment history, the lender must be notified that qualifying conditions may have changed since the original pre-approval was issued. For that reason, many lenders would advise buyers to fight the urge to make a change in employment until after close of escrow, just to be completely safe. It’s not the time to go from being a rocket scientist to opening a boutique.
· Credit worthiness: During the "feel good" stage, anticipating the decision on a home, buyers can go a bit crazy purchasing things on credit cards, such as furniture, new appliances, etc. and suddenly find that it can kick them in a place they least expect it – their credit scores. Some buyers even take lousy advice from well-meaning friends and skip or delay a mortgage payment on their current home, thinking they are already home free with a loan approval. WRONG. Don’t forget that most lenders conduct a fresh credit check prior to close of escrow.
· Communication: A homebuyer, after a pleasant meeting with the loan officer and a subsequent pre-approval is issued, tends to believe that no news is good news. In theory this may be true, but only from the lender's side of the desk. After all, your loan officer does not have the obligation of calling you weekly to see if any material changes have taken place in your employment status, your money reserves or your credit worthiness. He or she will also not check weekly or monthly with you to see if money has since been removed from some of the accounts already verified. It is therefore incumbent upon you, the buyer, to communicate any changes of this sort on a regular basis directly to the loan officer. Communication is definitely the key here, and the responsibility rests primarily with the borrower to maintain his approval status.
The scary thing for a home seller is the risk he or she takes in banking on acceping the offer of a preapproved buyer, using it as a green light to assume everything will go swimmingly after the inspections are done. The hard truth is, some pre-approvals can fall apart due to buyer neglect and mismanagement of their assets and credit-worthiness. The prospect of a seller have to remarket a home because you “fell” out of your approval means everyone loses.
In today’s tightened mortgage market, homebuyers may want to think of themselves as posing for a portrait at the time of pre-approval. Nothing should basically change within that portrait until after the escrow closes on their new home. No flinching, changing outfits, or background landscape alterations should take place, with the pre-approval photo "frozen in time." With that posture in mind, they can look forward to taking a deep breath on moving day.
Dena Kouremetis is a professional real estate journalist/blogger/author/content-writer and National Housing Examiner for Examiner.com. She has written for newspapers, magazines and online media since 1997 and now specializes in freelance writing for selected real estate professionals. Contact her at dena@communic8or.com.
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