THE DO’S AND DON’TS AFTER APPLYING FOR A MORTGAGE
Once you have found the right home and applied for a mortgage, there are some key things to keep in mind before you close. You are undoubtedly excited about the opportunity to decorate your new place, but before you make any large purchases, move your money around, or make any major life changes, consult your lender – someone who is qualified to tell you how your financial decisions may impact your home loan.
Below is a list of things you should not do after
applying for a mortgage. They are all important to know – or simply just good
reminders – for the process.
1. Do not Deposit Cash into Your Bank
Accounts Before Speaking with Your Bank or Lender. Lenders
need to source your money, and cash is not easily traceable. Before you deposit
any amount of cash into your accounts, discuss the proper way to document your
transactions with your loan officer.
2. Do not Make Any Large Purchases Like a
New Car or Furniture for Your New Home. New debt comes with
new monthly obligations. New obligations create new qualifications. People with
new debt have higher debt-to-income ratios. Higher ratios make for riskier
loans, and then sometimes qualified borrowers no longer qualify.
3. Do not Co-Sign Other Loans for Anyone. When
you co-sign, you are obligated. With that obligation comes higher ratios as
well. Even if you promise you will not be the one making the payments, your
lender will have to count the payments against you.
4. Do not Change Bank Accounts. Remember,
lenders need to source and track your assets. That task is significantly easier
when there’s consistency among your accounts. Before you transfer any money,
speak with your loan officer.
5. Do not Apply for New Credit. It
does not matter whether it is 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.), your FICO® score will be impacted. Lower
credit scores can determine your interest rate and maybe even your eligibility
for approval.
6. Do not Close Any Credit Accounts. Many
buyers believe having less available credit makes them less risky and more
likely to be approved. Wrong. 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 determinants of your score.
Bottom
Line
Any blip 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. The best plan is to fully disclose and discuss your
intentions with your loan officer before you do anything financial in nature.