While it’s exciting to start thinking about moving in and decorating after you’ve applied for your mortgage,
there are some key things to keep in mind before you close. Here’s a
list of things you may not realize you need to avoid after applying for
your home loan.
Don’t Deposit Large Sums of Cash
Lenders need to source your money, and cash isn’t easily traceable.
Before you deposit any amount of cash into your accounts, discuss the
proper way to document your transactions with your loan officer.
Don’t Make Any Large Purchases
It’s not just home-related purchases that could disqualify you from
your loan. Any large purchases can be red flags for lenders. People with
new debt have higher debt-to-income ratios (how much debt you have
compared to your monthly income). Since higher ratios make for riskier
loans, borrowers may no longer qualify for their mortgage. Resist the
temptation to make any large purchases, even for furniture or
Don’t Cosign Loans for Anyone
When you cosign for a loan, you’re making yourself accountable for
that loan’s success and repayment. With that obligation comes higher
debt-to-income ratios as well. Even if you promise you won’t be the one
making the payments, your lender will have to count the payments against
Don’t Switch Bank Accounts
Lenders need to source and track your assets. That task is much
easier when there’s consistency among your accounts. Before you transfer
any money, speak with your loan officer.
Don’t Apply for New Credit
It doesn’t matter whether it’s a new credit card or a new car, when
you have your credit report run by organizations in multiple financial
channels (mortgage, credit card, auto, etc.), it will have an impact on
your FICO® score. Lower credit scores can determine your interest rate
and possibly even your eligibility for approval.
Don’t Close Any Accounts
Many buyers believe having less available credit makes them less
risky and more likely to be approved. This isn’t true. A major component
of your score is your length and depth of credit history (as opposed to
just your payment history) and your total usage of credit as a
percentage of available credit. Closing accounts has a negative impact
on both of those aspects of your score.
Do Discuss Changes with Your Lender
Be upfront about any changes that occur or you’re expecting to occur
when talking with your lender. Blips in income, assets or credit should
be reviewed and executed in a way that ensures your home loan can still
be approved. If your job or employment status has changed recently,
share that with your lender as well. Ultimately, it’s best to fully
disclose and discuss your intentions with your loan officer before you
do anything financial in nature.
You want your home purchase to go as smoothly as possible. Remember,
before you make any large purchases, move your money around, or make
major life changes, be sure to consult your lender – someone who’s
qualified to explain how your financial decisions may impact your home