A home buyer should know that there are 2 stages to mortgage loan approval. We have heard of preapproval. When the buyer submits the loan application to his loan officer for preapproval, Stage 1 starts.
A pre-approval is a “walk-through” mortgage approval that says — at a given buy price and downpayment amount — the home loan application will very likely be approved.
This preliminary approval will not matter once the application goes to review for the actual mortgage loan. Stage 1 ends when the “underwriter”, not the loan officer becomes involved.
During the second phase of the approval process, a mortgage underwriter is reviewing income, assets, credit, job history, and other items, too; the underwriters job is to make sure that the buyer meets the bank‘s criteria for lending.
If Stage 1 was well completed by the loan officer, Stage 2 should be a formality. This stage usually proceeds as expected. But, it is possible that a buyer may innocently alter his “risk profile.” If this occurs, it will alter his loan risk thus affecting the mortgage approval. No one means to do this, but it just “happens.”
It is vital for the buyer to maintain a consistent “risk profile”. The following is the “DO NOT DO” list of 6 activities for a buyer to avoid during the period between Stage 1 and Stage 2 of the mortgage loan process:
1. Don’t buy a new car (or take on a larger lease payment) 2. Don’t quit your job or change industries (and certainly don’t switch to a heavily commissioned role) 3. Don’t transfer large sums of money into or out from your bank accounts (and remember that “large” is relative) 4. Don’t miss a payment to a creditor (even if you don’t reckon you owe it) 5. Don’t open a new credit card (even if you’re getting 10% off your new bedding) 6. Don’t accept a cash gift without talking to your loan officer first (because there’s rules on how to accept them)
This is the basic starter list of things not to do. You may still make some errors, but talk to your loan officer if you have concerns or need to break a “rule.” There can be “glitches.” throughout the mortgage loan process. Therefore, keep the lines of communication open between you and your loan officer.