Written by: Mary Beres | Vice President - Mortgage Lending | The Equitable Bank

Buying a home will likely be one of the largest financial decisions you make in your lifetime. The decision to purchase a home can be both exciting and intimidating, and naturally, you want to do everything you can to ensure the process goes smoothly.

A preapproval is one of the best places to start. In a competitive housing market, it may also be a necessary step if you want your offer to be taken seriously by sellers.

Working with an experienced lender, such as The Equitable Bank, can help you navigate the process with confidence. Our Loan Officers will work with you to determine what you can reasonably afford while verifying your income, assets and credit history. They will also discuss down payment options and loan programs that may best fit your financial circumstances.

Your preapproval request will be reviewed by Underwriters, and once approved, your preapproval can be shared with your real estate agent and the seller. This demonstrates that your offer is legitimate and that you have taken the necessary steps to secure financing. An underwritten preapproval can add significant strength and credibility to your offer.

Getting a preapproval is only the beginning. While you are searching for your new home, remember that your preapproval represents a snapshot of your financial situation at a specific point in time. It is important to keep your finances as consistent as possible from preapproval through your final loan approval and closing.

1. Acquiring New Debt

Taking on new debt—such as financing a vehicle, opening new credit cards or adding substantial balances to existing credit accounts—can increase your debt-to-income ratio (DTI).

Lenders use your DTI to evaluate your ability to manage your monthly debt obligations. An increase in your DTI can affect your loan eligibility and, depending on the circumstances, could put your approval at risk.

Your credit and financial profile will be reviewed again before closing to ensure that the information used to approve your loan remains accurate.

2. Maintaining Your Credit Score

Your credit score plays an important role in the mortgage approval process and can also influence the interest rate and loan terms available to you.

Several factors can affect your credit score, including payment history, new credit inquiries and the amount of available credit you are using. After receiving your preapproval, focus on maintaining or improving your credit profile:

• Make all payments on time.
• Keep credit card balances as low as possible.
• Avoid applying for new credit.
• Avoid activities that could result in additional credit inquiries.

3. Co-Signing Loans

Co-signing a loan is often done to help a family member or friend. It is important to understand the potential impact on your mortgage qualification.

From a lender's perspective, a co-signed debt may ultimately be your legal responsibility if the primary borrower fails to make the required payments. Depending on the circumstances and applicable underwriting guidelines, the debt and its payment may need to be considered when evaluating your financial obligations.

Before co-signing a loan, talk with your lender about how it could affect your mortgage approval.

4. Changing Jobs or Employment

For lenders, employment stability and consistent, reliable income are important factors in the mortgage approval process. A change in employment after preapproval could affect your approval.

It is not only the amount of your income that matters; the type and structure of your income can also impact how much income may be used to qualify. Hourly or salaried income may be evaluated differently from commission, bonus or overtime income.

A change in employment or compensation could therefore affect your qualifying income, debt-to-income ratio and overall loan approval.

If a job change cannot be avoided, contact your lender before making the change whenever possible. Your Loan Officer can help you understand how the change may affect your mortgage approval.

5. Making Large Deposits or Withdrawals

During the preapproval process, your lender will discuss the source of the funds you plan to use for your down payment and closing costs. Common sources include personal savings, proceeds from the sale of an existing home or an eligible gift.

These assets will generally need to be verified, and bank statements may be reviewed to confirm that the necessary funds are available and properly sourced.

Large or unexplained deposits can raise questions about the source of the funds and may require additional documentation. Similarly, transferring large sums between accounts can make it more difficult to document where your funds originated.

When in Doubt, Talk With Your Lender

The most important safeguard for your preapproval is open and timely communication with your lender.

If your financial circumstances change, let us know. Whether you are considering a new purchase, changing jobs, receiving a large deposit, transferring funds or taking on another financial obligation, your Loan Officer can help you understand the potential impact before you make a decision.

Not every change will jeopardize your mortgage approval, and some changes may be outside your control. Being transparent with your lender gives your lending team the opportunity to review the situation, provide guidance and help you adjust as needed.

Your preapproval is more than a number—it is the foundation of your homebuying strategy. Protect it by staying financially consistent, communicating with your lender and making informed decisions throughout the homebuying process.