Once you’re pre-approved, the last thing you want to do is knock yourself out of qualifying range. My friend Jay Vorhees at JVM Lending is a great source on this issue, as he’s seen hundreds of borrowers in this situation. Now, he sends them a list of “actions to avoid” with every pre-approval letter. Heeding his advice will help you at least prevent delays and extra paperwork. Take a look!
1. Do not make large deposits that can’t be explained. When you are trying to qualify, any large deposit – think $500 for a new mattress, or all-cash payments – must be explained. Otherwise, an entire account can become invalid and unusable for qualifying. Always keep a paper trail to make large deposit explanations easier!
2. Do not take on new debt. If you increase your credit card balances, finance a vehicle, or take on debt in another way, your ratios will be impacted and it will reduce your maximum purchase price.
3. Do not take vacation days if you’re paid hourly. A single day off work can push you out of qualifying range if your debt ratios are high and approaching your limit.
4. Do not spend liquid assets. Pre-approval software relies on specific liquid asset levels. So, pre-approval amounts can change if liquid assets are significantly reduced.
5. Do not miss payments on any debts reporting on a credit report. This one is pretty obvious, and you should avoid missing payments anyway, but missing monthly payments that reduce your credit score may also reduce your qualification amount!
6. Do not co-sign for someone else’s debts. That’s a dangerous maneuver anyway, but even if you’re just a co-signer, the debt will show up on your credit report. That makes you responsible for the debt and the payments.
7. Do not file taxes with a tax liability owing, or with less income than in previous years. This mostly applies to self-employed borrowers (especially during tax season). The most recently filed tax returns will be what the qualifying income is based on, and all tax liabilities must be proven paid. JVM recommends that borrowers file an extension when possible if they are making offers during tax season.
