A mortgage can still be delayed or denied after pre-approval. Until your loan closes and funds, lenders may re-check your employment, assets, and credit. That means changes to your job, your bank accounts, or your debt can create new underwriting issues at the last minute. After decades helping people in and around Seattle with their mortgage needs, we’ve seen borrowers make avoidable moves just before closing. Here are some of the most important things to avoid when applying for a mortgage or after being pre-approved for a home loan.
We had nearly completed Marge’s refinance. She was reducing her interest rate and drawing out cash for some home improvements. She was an ideal borrower—more than 20 years with the same company, flawless credit and a high appraisal on her home. Her salary was more than enough to qualify her for the loan she wanted. We were waiting for loan documents to arrive when I got a call from the underwriter.
“I have to decline this loan,” she said. I was shocked, since we had received the loan approval just a few days prior. “We did the verbal verification of employment this morning. She doesn’t work there anymore.”
I was surprised to hear this, since I had called Marge several times at work, and we had recent pay stubs from her job. I called her to see if there was some kind of mistake.
“I thought I told you,” she said. “I retired! Now I’ll have lots of time to work on fixing up my house.” Retired. No longer working. Drawing a small pension and Social Security—not enough income to qualify for the loan she wanted.
I had to tell her she wouldn’t get the loan. She thought that since her loan had been approved, it was clear sailing. So she retired before her loan was completed. If she had waited just three days, she would have been fine.
The lesson: Don’t make any significant changes in your employment—or leave your job—while your loan is in process. Underwriters are qualifying you based on the income and employment they documented, and lenders often perform a last-minute employment check before issuing funds. If you are thinking about changing jobs, retiring, switching from salary to commission, or reducing hours, tell your lender before you do it. In some cases, the change may be workable, but you may need updated pay stubs, an offer letter, or other documentation. For both homebuyers and refinancers, waiting until after closing can make the difference between a smooth closing and a denied loan.
Bret and Mary were buying their first home. They had saved enough cash for their down payment and had given us bank statements to show that the money had been in their accounts for at least two months (this is called “seasoned funds” in bank lingo). I cautioned them about moving money around. I explained that every penny in the transaction has to be documented, including transfers from other accounts. Bret, a lawyer, assured me that he understood how it worked.
When the day for signing the final documents arrived, Bret had a cashier’s check with him. It was drawn on a bank I wasn’t familiar with. He had forgotten to tell me about this other account. I explained that he’d have to bring bank statements for that new account.
He sent them to me that afternoon. I found a number of large deposits—several thousand dollars. They were gifts from relatives, he said.
We spent the next week tracking down these generous relatives and getting them to sign gift letters—and providing us with their own bank statements to source the funds they were giving to Bret and Mary. They were reluctant at first, but, at Bret’s urging, they gave us the documents we needed to close the transaction—a week later than we had planned.
The lesson: Don’t bring any new accounts into the picture at the last minute. Lenders have to account for every dollar used in the transaction, and unexplained transfers or deposits can trigger more documentation requests. If you receive a gift, move money between accounts, or plan to use funds from an account your lender has not already reviewed, notify your loan officer first. You may need bank statements, transfer records, or gift documentation. This matters most for purchase loans because cash to close must be sourced, but refinancers can also run into delays if asset documentation changes during underwriting. If possible, keep your accounts stable until after closing.
Maria and Peter were refinancing to reduce their rate, saving nearly $500 a month. We had gotten their loan approved quickly and were about to order loan documents to complete their transaction. My phone rang as I was completing the document order. It was Maria.
“Guess what we did!” she said. I had a sudden sinking feeling. “We finally got that new car we wanted!” This was not good.
“Please tell me you didn’t get a loan on the car,” I said.
“Oh, we got a great rate, and a good deal on the car. We’ll be able to make the payments with the money we’re saving on the loan.” I ran some quick calculations. They no longer qualified with the additional payment.
Lenders are far more cautious than they were just a few years ago. All lenders will perform a “credit refresh” right before funding every loan. This is to determine whether the borrower has incurred any new debt since the application. In Maria and Peter’s case, the new car loan showed up on the credit refresh. Fortunately, we were able to get the dealership to take the car back and cancel the sale, so their loan was funded.
The lesson: No new credit until the loan is complete. Your approval is based in part on your existing monthly obligations, so a new car loan, credit card, personal loan, or even a new inquiry can create problems before closing. If you think you may need to finance something, talk to your lender first so they can tell you whether it could affect your approval. For purchase borrowers and refinancers alike, the safest move is to wait until after closing before taking on new debt or allowing anyone else to run your credit.
Preparation is key to avoiding mortgage mistakes. The last thing you want is to find out during your closing week that your loan has been delayed or denied because something changed after pre-approval. If you are unsure whether a job change, deposit, transfer, gift, payoff, or new account could affect your approval, tell your lender right away. In many cases, the issue is not the change itself, but the timing and documentation.
If you’re refinancing your home, arm yourself with the information included in our free ebook, which you can download by clicking here.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
Yes. Pre-approval does not guarantee final approval. Until the loan closes and funds, the lender may re-check employment, assets, and credit, and new issues can still delay or derail the loan.
Changes to your job, income, bank accounts, deposits, transfers, or debt can trigger more review before closing. Lenders may ask for updated documents or re-calculate whether you still qualify.
Avoid changing jobs, retiring, reducing hours, moving money between accounts without telling your lender, bringing in new accounts at the last minute, or taking on new debt. Even small late-stage changes can create underwriting problems.
Yes. If you change jobs, retire, switch from salary to commission, or reduce your hours while the loan is in process, the lender may need new documentation and may decide the income no longer qualifies.
Yes. Lenders must document the funds used in the transaction, so unexplained transfers between accounts can lead to more questions and more paperwork. Keeping your accounts stable until after closing can help avoid delays.
Yes. Large deposits, gifts, or other new funds may need to be sourced and documented. Letting your lender know right away gives them time to tell you what records or gift documentation are required.
It can. Lenders often perform a credit refresh right before funding, and a new credit card, loan, or other debt can affect your debt-to-income ratio or create new underwriting questions.
A big purchase is any purchase that adds new debt or changes your financial profile in a meaningful way, such as buying a car, financing furniture, or opening a new credit account. If a purchase may involve credit, check with your lender first.
Using a credit card can be risky if it increases your balances significantly or leads to a new monthly payment issue. The safest approach is to avoid new debt and keep your credit profile as stable as possible until after closing.
In the final weeks before closing, the lender may complete last-minute checks on your employment, assets, and credit. That is why late changes to your job, your bank accounts, or your debt can still cause a delay or denial.
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