What Not to Do During Mortgage Approval

New loans, big purchases, job changes or large, unexplained bank deposits could jeopardize or delay final mortgage approval.
Kevin Cash
Barbara Marquand
By Barbara Marquand and  Kevin Cash 
Edited by Beth Buczynski Reviewed by Michelle Blackford
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You’re well on the way to financing a home once you’re preapproved for a mortgage. But miles remain before the finish line, and the ride can get bumpy if you’re not careful.

A preapproval offer from a lender is based on an evaluation of your credit, income, debt and assets. If those things significantly change before final approval, the offer might not stand.

Here are things not to do before the loan closes:

» MORE: Learn how to get preapproved for a mortgage

1. Don’t apply for new credit

Your credit can be pulled at any time up to the closing of the loan. Any negative changes could alter the terms of the deal or perhaps torpedo it altogether. Applying for other credit lines and loans can impact your credit score, and accumulating more debt will increase your debt-to-income ratio, a key factor lenders consider when you apply for a mortgage.

» MORE: Learn why your debt-to-income ratio matters

2. Don't miss credit card and loan payments

Keep paying your bills on time. Payment history is one of the most important factors in your credit score, and late payments on credit accounts — 30 days or more — can hurt.

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3. Don’t make any large purchases

It can be tempting to start buying furniture, appliances and other pricey household items to prepare for homeownership.

But paying cash will dent your savings, and charging substantial purchases will increase your debt-to-income ratio and credit utilization, or the percentage of available credit in use. Experts recommend keeping credit utilization under 30% to maintain a good credit score.

As a general rule, wait until after you close on the mortgage to consider big purchases.

4. Don’t switch jobs

This might be out of your control, but it’s wise not to actively change jobs during the loan-approval process. A career change could mean an income adjustment and revisions to the amount you're approved to borrow.

5. Don’t make large deposits without creating a paper trail

To a loan underwriter, large deposits may indicate newly borrowed money and a higher debt-to-income ratio. For some consumers, this might mean they are less likely to qualify for a mortgage.

If a loan officer sees large deposits, typically over $1,000, she must be able to trace their origin. Anything that isn’t clear must have an explanation.

If a loan officer sees large deposits, typically over $1,000, she must be able to trace their origin. Transfers between accounts and payroll deposits are generally fine, but anything that isn’t clear must have an explanation.

Not sure? Ask

Any major changes in personal income, assets or debt can alter the terms of your mortgage offer, or tank it completely. If you're not sure how an action might affect your application, ask your loan officer for advice.

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