Applying For a Mortgage? Here’s What You Should Avoid Once You Do

Applying For a Mortgage? Here’s What You Should Avoid Once You Do

While it's exciting to think about moving in and decorating after you've applied for a mortgage, there are a few things you should think about before closing. Here is a list of things you should avoid after applying for a mortgage that you may not be aware of.

Don’t Deposit Large Sums of Cash
Lenders must source your funds, and cash is difficult to track. Before you deposit any funds into your accounts, consult with your loan officer about the best way to document your transactions.

Don’t Make Any Large Purchases
It's not just home-related purchases that can cause you to lose your loan. Lenders may raise an eyebrow if you make a large purchase. People who have taken on new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Because higher ratios result in riskier loans, borrowers may no longer be able to obtain a mortgage. Resist the urge to make large purchases, even if they are for furniture or appliances.

Don’t Cosign Loans for Anyone
When you cosign for a loan, you hold yourself responsible for its success and repayment. Higher debt-to-income ratios accompany that obligation. Even if you promise that you will not be making the payments, your lender must count the payments against you.

Don’t Switch Bank Accounts
Lenders must locate and track your assets. When your accounts are consistent, this task becomes much easier. Speak with your loan officer before transferring any funds.

Don’t Apply for New Credit
Whether it's a new credit card or a new car, having your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.) will affect your FICO® score. Lower credit scores can affect your interest rate and possibly even your approval.

Don’t Close Any Accounts
Many buyers believe that having less credit available makes them less risky and thus more likely to be approved. This is not correct. Your length and depth of credit history (rather than just your payment history) and total credit usage as a percentage of available credit are important factors in your score. Closing accounts reduces your score in both of those categories.

Do Discuss Changes with Your Lender
When speaking with your lender, be honest about any changes that have occurred or are expected to occur. Changes in income, assets, or credit should be reviewed and implemented in such a way that your home loan can still be approved. If your job or employment status has recently changed, notify your lender. Finally, before you do anything financial, it's best to fully disclose and discuss your intentions with your loan officer.

In conclusion
You want everything to go as smoothly as possible with your home purchase. Remember to consult your lender before making any large purchases, moving your money, or making major life changes - someone who is qualified to explain how your financial decisions may impact your home loan.

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