Avoid These Common Mistakes After Applying for a Mortgage
If you’re on the verge of purchasing a home, the anticipation of moving in and personalizing the space can be exhilarating. However, before delving too deeply into the emotional aspects, it’s crucial to consider some essential factors after applying for your mortgage and before the closing process. Take note of the following reminders as you navigate through the home loan application process.
Don’t Deposit Large Sums of Cash
Lenders are required to trace the source of your funds, and cash transactions can be challenging to track. Prior to depositing any cash into your accounts, it is advisable to have a conversation with your loan officer about the appropriate methods for documenting your transactions.
Don’t Make Any Large Purchases
It’s not limited to home-related acquisitions that might hinder your loan eligibility. Any substantial purchases can raise concerns for lenders. Individuals taking on new debt often experience elevated debt-to-income ratios, indicating a higher level of debt relative to their monthly income. Given that increased ratios pose greater risks for loans, borrowers may find themselves ineligible for their mortgage. It’s advisable to avoid making significant purchases, whether for home-related items, furniture, or appliances, to maintain qualification for your loan.
Don’t Cosign Loans for Anyone
By cosigning a loan, you assume responsibility for its success and repayment. This commitment brings about increased debt-to-income ratios. Even if you assure that you won’t be the one handling the payments, the lender will still consider them as part of your financial obligations.
Don’t Switch Bank Accounts
Lenders are required to verify and monitor your assets, and this process is simplified when there is uniformity across your accounts. Prior to initiating any fund transfers, it is advisable to consult with your loan officer.
Don’t Apply for New Credit
Whether it’s a recent credit card application or the acquisition of a new car, the act of having your credit report accessed by entities across various financial sectors (such as mortgage, credit card, auto, etc.) can influence your FICO® score. Reduced credit scores can affect your interest rate and potentially impact your chances of approval.
Don’t Close Any Accounts
Some buyers mistakenly think that reducing their available credit makes them appear less risky and increases their chances of approval. However, this is a misconception. A significant factor in your credit score is the length and depth of your credit history, not just your payment history, and the proportion of your total credit usage to the available credit. Closing accounts adversely affects both aspects of your credit score.
Do Discuss Changes with Your Lender
Transparently communicate any changes or anticipated changes with your lender. Review and address any fluctuations in income, assets, or credit to ensure the continued approval of your home loan. If there have been recent changes in your job or employment status, it is crucial to inform your lender. In essence, it is advisable to openly disclose and discuss your financial intentions with your loan officer before making any financial decisions.
Bottom Line
For a seamless home purchase process, it’s essential to exercise caution. Before engaging in significant purchases, reallocating funds, or undergoing major life changes, seek guidance from your lender—a qualified professional capable of clarifying how your financial choices might affect your home loan. I am happy to connect you with a trusted lender.
