While the anticipation of planning your move and decorating is certainly exciting after applying for a mortgage, it’s crucial to keep a few important considerations in mind before reaching the closing stage. Post loan application, there are certain pitfalls you’d be wise to steer clear of.
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Avoid making large cash deposits.
Cash is hard to track down, and lenders need to know where you got your money. Talk with your loan officer about how to properly record your transactions before you deposit any money into your accounts.
Avoid Making Any Major Purchases
Be cautious about non-home-related purchases, as they could jeopardize your loan approval. Lenders tend to scrutinize substantial expenditures, as they can impact your debt-to-income ratio, which measures your debt relative to your monthly income. Elevated ratios resulting from new debt could render borrowers ineligible for their mortgages, especially for riskier loans. Resist the temptation to make substantial purchases, including those for appliances or furniture, to safeguard your loan approval.
Don’t Cosign for Anyone’s Loans
You assume responsibility for the loan’s success and repayment when you cosign for it. Higher debt-to-income ratios result from that obligation. Your lender will have to count the payments against you even if you promise that you won’t be the one making them.
Avoid changing bank accounts.
Lenders must locate and keep track of your assets. When all of your accounts are consistent, that task is much simpler. Speak with your loan officer prior to making any financial transfers.
Avoid requesting new credit.
Having your credit report checked by businesses in multiple financial channels (mortgage, credit card, auto, etc.) will affect your FICO® score, regardless of whether you’re applying for a new credit card or a new car. Lower credit scores can affect your interest rate and perhaps even your approval eligibility.
Don’t Close Any Accounts
Many buyers think they are less risky and more likely to be approved if they have less available credit. That is untrue. Your total credit usage as a percentage of available credit and the length and depth of your credit history (as opposed to just your payment history) both play a significant role in determining your credit score. Both of those aspects of your score are lowered by account closures.
Do communicate any changes to your lender.
Maintain transparency when communicating with your lender, promptly disclosing any recent or anticipated changes in your financial circumstances. Whether it involves alterations in income, assets, or credit, these changes should be addressed thoughtfully to ensure the continued approval of your home loan. Additionally, if you’ve experienced shifts in your employment status recently, it’s vital to inform your lender. Ultimately, complete honesty and openness with your loan officer should precede any financial decisions to navigate the process effectively.
To sum up
You want everything to go as smoothly as possible when you buy a house. Remember to speak with your lender—someone qualified to explain how your financial decisions may affect your home loan—before you make any significant purchases, money transfers, or other life changes.