A dramatic black raven with deep blue highlights appears against a dark background beside a bold navy headline explaining five actions that can jeopardize a mortgage pre-approval.

5 Things That Can Kill Your Mortgage Pre-Approval

Receiving a mortgage pre-approval is an exciting step. It gives you a better understanding of your purchasing power and shows sellers that you have already spoken with a lender.

However, a pre-approval is not a permanent guarantee.

Your lender may verify your credit, employment, income, debts and available funds again before closing. A major change in any of those areas could affect your loan amount, delay the process or, in some cases, prevent the loan from closing.

Here are five common mistakes to avoid between pre-approval and closing.

1. Missing a Credit Card Payment

Your payment history is one of the most important factors affecting your credit score. Even one payment reported as late could lower your score and change the loan terms or programs available to you.

Continue making every payment on time throughout the mortgage process. That includes credit cards, vehicle loans, student loans and accounts you may not use regularly.

Autopay can help, but it is still a good idea to check your accounts and confirm that each payment was processed correctly.

2. Financing a New Vehicle or Furniture

Once buyers find a home, it is tempting to start preparing for it immediately. That might mean buying a new vehicle for the commute or opening a store account for furniture and appliances.

Unfortunately, new debt creates a new monthly obligation. That payment must generally be included in your debt-to-income ratio, commonly called DTI.

Even an offer advertising “no payments for 12 months” can involve a new credit inquiry and a newly opened account. If your qualifying numbers were already close, that new debt could be enough to create a problem.

Do not apply for new credit or co-sign a loan without speaking with your lender first.

3. Spending Your Savings on a Golf Cart

This may sound oddly specific, but large purchases really do happen while buyers are under contract.

Your lender reviewed your bank balances for a reason. Those funds may be needed for the down payment, closing costs, prepaid expenses or financial reserves required by the loan program.

Draining the account for a golf cart, vacation, boat, wedding or another major purchase could leave you without enough verified funds to close.

Enjoy the new house first. The golf cart can wait.

4. Changing Career Paths

Not every job change will ruin a mortgage approval. Moving to a new employer within the same industry, with similar or higher pay, may be perfectly acceptable.

The situation can become more complicated when a borrower:

  • Changes to a completely different line of work

  • Leaves a salaried position for commission-only income

  • Becomes self-employed

  • Reduces work hours

  • Takes an extended break between jobs

  • Accepts compensation that depends heavily on bonuses or overtime

Underwriters must determine whether the new income is stable, documented and likely to continue. Some types of income require an established history before they can be used for qualification.

If you are considering an employment change, talk with your lender before giving notice or accepting the new position.

5. Moving Large Amounts of Money Without a Reasonable Explanation

Lenders are required to review the source of the funds being used in a mortgage transaction. Large deposits, cash deposits and transfers between accounts may need additional documentation.

Transferring money is not automatically a problem. The problem is creating a trail that cannot easily be followed.

For example, transferring money through several accounts, depositing cash saved at home or receiving funds from another person without the proper documentation could delay underwriting. In some cases, the lender may not be able to count those funds at all.

Keep your money where it is whenever possible. If you need to transfer funds or receive a gift, ask your lender how to document it properly before completing the transaction.

The Best Rule to Follow

Between pre-approval and closing, avoid making major financial changes without first talking with your lender.

That includes:

  • Opening or closing credit accounts

  • Financing a major purchase

  • Co-signing for someone else

  • Changing jobs or compensation structures

  • Moving or depositing large amounts of money

  • Spending funds reserved for closing

Your lender would much rather answer a quick question beforehand than try to repair an avoidable problem afterward.

A pre-approval is the beginning of the mortgage process. Protect it by keeping your finances stable, maintaining clear records and staying in communication with your lender until the keys are officially yours.