Starting the mortgage process can be equally exciting and daunting.
You will find yourself hastily preparing all documentation needed and consulting with your loan officer on a pretty regular basis. While your loan application is being reviewed and moving towards approval, there are a number of things that can greatly impact your ability to obtain a loan or delay your closing date. It’s common for borrowers to be unaware that certain actions shouldn’t be taken while getting a home loan, so we’ve compiled a list of “no-nos” to help guide you.
1. Don’t Change Your Job
If you change jobs before or during the loan process it can create real problems in qualifying for a home loan, particularly if your new job is in a different line of work or at a lower rate of pay. During the loan process, it can also create time delays as the new job will need to be verified. In some cases, loans will be denied because a borrower cannot verify that a new position will provide the same financial stability that their previous job did.
2. Don’t Change Banks or Move Your Money
Moving your money to a new bank interferes with the verification process. It is best to leave your money where it is until your loan closes, unless otherwise recommended by your loan officer.
3. Don’t Make Any Major Purchases
Many borrowers make the mistake of buying a new car or making another major purchase without realizing the impact it can have on their ability to buy a home. However, what these big purchases do is raise your debt to income ratio, which could make your new home unaffordable. A new monthly payment can affect the amount you qualify for and actually make it difficult to get your loan approved.
4. Don’t Deposit Cash
Don’t deposit any cash or money into your accounts other than funds that can be documented, such as pay checks or gift checks. Cash deposits can cause a file to be denied if the source isn’t allowed or undocumented.
5. Don’t Close Credit Card Accounts
This may seem like a good idea, but its not. If you close credit card accounts, it can affect your ratio of debt to available credit, which has a 30% impact on your credit score. We want to see that you have funds available, even if you don’t plan to use them. If you really want to close an account, do it after your mortgage loan closes.
6. Don’t Apply For New Credit of Any Kind
Ok, we did just say not to close any of your credit…but we also don’t want you to open any new ones! If you receive invitations to apply for new lines of credit, don’t respond. If you do, that company will pull your credit, and this will have an adverse effect on your credit score. Likewise, don’t establish new lines of credit for furniture, appliances, computers, etc.
7. Don’t Fail To Disclose Any Financial Information
Surprises during the loan process can make it difficult for the lender to approve your loan. In most cases, just one unexpected piece of information can open up a can of worms that requires more time and documentation than it would have if it had been revealed up front. Disclosure to the loan officer initially allows time to work on potential problems.
Many get so excited by the idea of a new home, that they want to revamp other parts of their life as well – maybe a new job or some furniture to fill the space? However, this is the very worst thing you can do when trying to get approved. All in all, it is best to just sit tight and keep things as clear and constant as possible. This will make the experience easier for both you and the mortgage team reviewing your file. If you have any confusion on whether or not something will affect your mortgage, then do not hesitate to call your Loan Officer and ask. We can guarantee it will be worth it in the long run!
