Why You Must Maintain Your Financial Status After an Offer

An accepted home offer is an exciting step, but the financial journey continues until closing. Maintaining financial stability during this period is paramount. A pre-approval assesses borrowing capacity but doesn’t guarantee final loan approval. Significant financial changes can jeopardize the transaction, causing delays or loan withdrawal.

The Lender’s Ongoing Scrutiny

Lenders conduct continuous due diligence to ensure a borrower’s financial profile remains consistent with the initial application. Pre-approval is a preliminary step; the lender’s verification process extends throughout the closing period. This ongoing scrutiny confirms the borrower’s continued ability to repay the loan.

Lenders perform a final credit pull, typically close to closing, to identify new debts or significant credit changes. They also conduct verbal verification of employment (VOE) to confirm job status, position, and income. This ensures the borrower remains actively employed as disclosed.

Lenders meticulously review bank statements to verify assets, typically requesting the most recent months. They examine them for consistent income, spending habits, and fund sources. Unexplained large deposits raise red flags, as lenders must confirm funds are not undisclosed loans or from illicit sources. This re-verification mitigates risk and ensures financial information accuracy.

Impact of Credit Score and Debt Changes

Changes to credit and debt significantly impact a home purchase during underwriting. Lenders primarily focus on the borrower’s debt-to-income (DTI) ratio, comparing monthly debt payments to gross monthly income. Most lenders prefer a DTI below 36%, though some programs allow higher ratios. Increased debt can elevate this ratio beyond acceptable limits, leading to loan disqualification.

Opening new lines of credit (e.g., credit cards, personal loans, vehicle financing) increases debt burden and DTI. This can also temporarily drop credit scores due to hard inquiries and reduced average account age. Even zero-balance accounts can trigger loan re-evaluation or denial. Lenders closely monitor credit activity, as new debt suggests a change in financial capacity.

Closing existing credit accounts can also negatively affect a credit score. This reduces total available credit, increasing the credit utilization ratio if balances are carried on other cards. A higher utilization ratio or shortened credit history (from closing older accounts) can lower scores. While paying down debt is beneficial, closing accounts during the mortgage process is generally not advisable.

Impact of Income and Asset Changes

Maintaining stable income and verifiable assets is fundamental for final loan approval. Shifts in employment status significantly alter a lender’s assessment of a borrower’s ability to meet mortgage obligations. Job loss, industry changes, reduced hours, or pay cuts raise concerns. Lenders prefer consistent employment history, often two years with the same employer. Favorable job changes, like promotions, still require re-verification and can cause delays.

Income changes, like moving from salary to commission or becoming self-employed, require additional documentation and in-depth lender review. Lenders verify new income stability, often reviewing tax returns or business statements. Quitting a job before closing is problematic, as it removes the income source for loan approval, potentially leading to rescission.

Large or unexplained bank deposits trigger significant scrutiny. Lenders require documentation for single large deposits or unusual clusters of smaller ones. These “mystery funds” must be sourced and documented to ensure they are not borrowed funds affecting DTI or from unverified sources. If gift funds are used for a down payment, a formal gift letter from the donor is required, stating the money is a gift with no repayment expectation, along with fund transfer documentation.

Navigating the Period Until Closing

The period between an accepted offer and closing demands disciplined personal finances. To ensure a smooth process, refrain from making large purchases. This includes new vehicles, furniture, or appliances, especially if they require financing or deplete cash reserves for closing costs or down payment. Even cash purchases can raise questions about depleted assets.

Avoid applying for or opening new credit accounts, including credit cards, personal loans, or lines of credit. These actions negatively impact credit scores and increase the debt-to-income ratio, potentially causing delays or loan denial. Maintain consistent spending habits and pay all existing bills on time to preserve a favorable credit history.

Avoid significant employment changes during this sensitive timeframe. Switching jobs, especially to a different industry, with a pay cut, or a change in pay structure (e.g., salary to commission), complicates income verification. If an employment change is unavoidable, communicate immediately with your loan officer to understand implications and provide new employer documentation.

Avoid large or unusual bank deposits or withdrawals without clear documentation. Any substantial funds must be traceable and justifiable to the lender. For any financial decision affecting credit, debt, income, or assets, proactively consult your loan officer. This communication helps anticipate and address potential issues, keeping your path to homeownership clear.