Fridays with the Fiddle Fig: Escrow Misconceptions
4 Main Misconceptions After Bring Pre Approved for a Home Loan
People get excited after getting pre approved for a home loan and get under the perception that they can then go out and make other big purchases. Getting excited to create new life, new furniture ect.
A large purchase after being pre approved can greatly effect your credit score and can interfere with the escrow process.
Another misconception is that you can go out and get a new job after being pre approved for a home loan. This is another big potential set back. Lenders will verify your income with your current employer during the escrow process and will have a conversation with them to make sure you have a steady, reliable income. One loop hole with this is if you are changing jobs but staying within the same line of work (without your income varying much). The lender will, of course, also need verification of this from both employers.
Paying Off Debts
Sometimes people will have an extra chunk of money after being approved for a loan. There's a misconception that paying off other loans will help you qualify for a bigger home loan. This is definitely not recommended as lenders will require a certain amount of cash reserve in your bank account to help verify that you are able to afford the loan.
Receiving a Large Gift Fund
It is not a good idea to receive a large gift fund from someone in order to help qualify for a loan. Lenders will go back two months on your bank statements and will require a clear paper trail as to where the money is coming from.
We always recommend speaking with your loan professional whenever these big questions come up with purchases or major life transitions in order for it to not negatively effect your escrow process.