How to protect your pre-approval

Once you have been pre-approved for a home loan, you should avoid making any significant changes to your financial situation until you have bought your new home and your home loan account has been activated.

Pre-approval

It would seem obvious, for example, that you need to keep paying your bills in the time between home loan pre-approval and the transfer of your new home, but it is easy to forget things or pay late in the excitement of house hunting.

In addition, you should make sure you don’t go into overdraft on any of your accounts, and that any debit order payments are left as they are. Your preapproval is a “snapshot” of your financial situation at a particular time, and you need to stay as close to that picture as possible until your home loan is granted.

This is why you should also not apply for any new credit during this period. Mortgage lenders are bound to do a second credit check before a final loan approval, and if you’ve opened a new account, this will have to be verified, and that could delay your approval. Of course your credit score could change because of the new credit, which might mean an adjustment to the interest rate you will be charged as well.

What is more, if you have bought something major on credit, the lender will have to factor the repayments into your debt-to-income ratio, as required by the National Credit Act, which could result in you not getting the loan at all.

You should also be careful about paying cash for large purchases at this time, or even paying off a debt like a credit card balance, as that could result in you having lower reserves to cover a deposit or the transfer costs, and once again change the lender’s assessment of your financial situation when it comes to granting the loan.

In short, every move you make with your money will have some sort of impact, so you should consult your mortgage originator and the lender that gave you the pre-approval before you do anything.

If you can avoid it, you must also really try not to change jobs after a preapproval. Even if it seems like a good career move, the bank would have to verify the details and might well require a few months’ worth of payslips to prove your new salary, and that could delay your loan approval by quite a long time.

And finally, although adding to your assets should not be a problem, you should keep records of any unusual deposits into your bank accounts at this time. If you receive a bonus or a gift of cash, for example, or sell some shares or other assets, you must be able to prove where the money came from.

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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