You've been preapproved for a mortgage, found the perfect home, and your offer has been accepted. Congratulations! But before you start picking out paint colors and planning the housewarming party, there's something important you need to know: Your mortgage isn't officially approved until the lender gives the final green light.
I'm Rich Iacovetta, a mortgage broker with Barrett Financial Group LLC in Folsom, California. I've been helping people with mortgages since 2003, and I've seen how seemingly harmless financial decisions can create unexpected problems during the loan process.
Whether you're buying a home in Sacramento, Folsom, or somewhere in between, here are seven mistakes you'll want to avoid between preapproval and closing.
1. Making Large Purchases Before Closing
I understand the excitement. You're buying a new home, so naturally, you're thinking about new furniture, appliances, and maybe even that big-screen TV you've been eyeing.
But financing those purchases before your mortgage closes could create problems.
Lenders evaluate your debt-to-income ratio (DTI), which compares your monthly debt obligations to your qualifying income. Taking on a new car payment, furniture financing, or another monthly obligation can change those numbers.
Even if you've already been preapproved, your lender may review your credit and financial obligations again before closing.
My advice: Hold off on major purchases, especially financed purchases, until your mortgage has funded and the transaction has closed.
That new sectional sofa will still be available after you get your keys. And if it isn't, I'm pretty sure someone will manufacture another one.
2. Opening New Credit Cards or Financing Accounts
Retailers love offering discounts for opening new credit accounts.
Save 15% on your purchase today! Sounds great, right?
Not necessarily when you're in the middle of getting a mortgage.
Applying for new credit can generate a hard inquiry, and opening a new account may affect your credit score, available credit, or monthly debt obligations.
Depending on your qualifications, even a relatively small change could affect your mortgage terms or approval.
My advice: Avoid applying for new credit cards, personal loans, auto loans, or store financing while your mortgage is in process.
If you're considering any new credit, talk with me first.
3. Changing Jobs or How You're Paid
Changing jobs doesn't automatically disqualify you from getting a mortgage. In some situations, moving to a better-paying position in the same field may be perfectly acceptable.
But the details matter.
For example, switching from a salaried position to self-employment, moving from hourly wages to commission-based income, or taking a job with a different compensation structure could affect how your income is calculated.
Lenders generally need to verify that your income meets the requirements of the loan program.
My advice: If you're considering changing employers, reducing your hours, starting a business, or changing how you're compensated, discuss it with me before making the move.
A great new career opportunity shouldn't have to come with an unexpected mortgage complication.
4. Making Large, Unexplained Bank Deposits
This one surprises a lot of homebuyers.
You might think having extra money in your bank account would make a lender happy. And generally speaking, having sufficient funds for your down payment and closing costs is a good thing.
But lenders also need to verify where certain funds came from.
Large or unusual deposits may require additional documentation, particularly when those funds are being used to qualify for the mortgage.
For example, money from selling a vehicle, receiving a gift from a family member, or transferring funds between accounts may need to be documented.
And depositing a few thousand dollars in cash that you've been keeping at home could raise questions about whether those funds are an acceptable source.
My advice: Before making unusual deposits or moving significant amounts of money, ask me how to document the transaction properly.
The money itself may be perfectly legitimate. We just want to avoid unnecessary delays while proving where it came from.
5. Moving Money Between Accounts Without Keeping Records
Maybe you have money in savings, checking, an investment account, or another financial institution.
Transferring funds between your own accounts is often perfectly acceptable.
However, when money moves from one account to another, the lender may need statements or transaction records showing where the funds originated.
If those transfers aren't properly documented, it can create extra work during underwriting.
My advice: Keep clear records of transfers and avoid unnecessary financial shuffling while your loan is being processed.
Your money doesn't need to play musical chairs while we're trying to close your mortgage.
6. Missing Document Requests or Being Slow to Respond
Mortgage underwriting involves verifying income, assets, employment, credit, and property information.
Sometimes additional documentation is needed even after you've submitted everything initially requested.
A lender might ask for an updated bank statement, a letter explaining a particular transaction, or clarification about your employment.
These requests aren't necessarily signs that something is wrong. They're often simply part of the approval process.
But delays in providing requested information can slow things down, especially when you're working toward a contractual closing date.
My advice: Keep an eye on your email and phone during the mortgage process. When I request something, there's usually a reason, and getting it back promptly helps keep things moving.
I promise I'm not asking for another bank statement because I enjoy collecting them.
7. Assuming You're Fully Approved Because You Were Preapproved
This may be the most important mistake on the list.
A mortgage preapproval is an excellent first step, but it isn't a guarantee that your loan will close.
Final approval generally depends on several factors, including satisfactory underwriting, verification of your financial information, the property's appraisal and eligibility, title requirements, and any outstanding loan conditions.
Lenders may also perform additional checks before funding, including employment or credit-related verifications.
That's why I encourage my clients to maintain their financial situation as consistently as possible throughout the process.
My advice: Don't make major financial changes or assume everything is final until your loan has funded and your purchase has officially closed.
Buying a Home in Sacramento or Folsom? Preparation Makes a Difference.
Purchasing a home should be an exciting experience. And while no mortgage transaction is completely free of potential surprises, many common problems can be avoided with good communication and a little planning.
I've been in the mortgage business since 2003, and one of the most valuable things I can do for my clients is help them understand what to expect before problems arise.
As a mortgage broker with Barrett Financial Group LLC, I work with multiple wholesale lenders and help homebuyers explore financing options that fit their individual circumstances.
Whether you're purchasing your first home in Sacramento, moving into a larger home in Folsom, or buying elsewhere in Placer or El Dorado County, my goal is to make the process as straightforward as possible.
Here's my final piece of advice: When in doubt, ask before you act.
A quick phone call or email before making a financial decision can be a lot easier than trying to fix an unexpected problem a few days before closing.
I'm Rich Iacovetta, and I'd welcome the opportunity to help you navigate your next home purchase with confidence.
Making Mortgages Simple. Making Homeownership Possible.
Preparing to Buy a Home?
Avoiding these mistakes is just one part of preparing for homeownership. If you're still exploring your financing options, check out my articles on barrettfinancial.com/rich-iacovetta/blog/buying-home-folsom-mortgage-preapproval-3 and FHA vs. Conventional Loans: Which Is Better for You? to help you make informed decisions.
