While it’s exciting to start thinking about moving in and making the home yours after you’ve applied for your mortgage, there are some key things to keep in mind before you close. Here’s a list of Dos and Don’ts you may not be considering. So, when making your home loan application and going through the process, keep these in mind!
Don’t Deposit Large Sums of Cash
Lenders need to source your money, and cash is not easily traceable. If you need to deposit any amount of cash into your accounts, discuss the proper way to document your deposits with your loan officer. This includes any gift funds from relatives!
Don’t Make Any Large Purchases
Large purchases can be red flags for lenders. Large purchases may change your debt-to-income ratios (how much debt you have compared to your monthly income) and could disqualify you from your mortgage loan. Resist the temptation to make any large purchases, even for furniture or appliances, until AFTER your home closes.
Don’t Cosign Loans for Anyone
When you cosign for a loan, you’re making yourself accountable for that loan’s success and repayment and adds to your personal 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 you as you are responsible for the payments.
Don’t Switch Bank Accounts
Lenders need to source and track your assets and this task is much easier when there’s consistency among your accounts. As mentioned above, 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.
Do Keep All Accounts Open
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.
Do Be Honest with Your Lender
Be honest about your past. There is never any judgment and your lender needs to know about any past judgments, bankruptcy, late pays, etc. Hiding this information from them will certainly be found and then could disqualify you from your loan application.
Bottom Line
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. I am here to help as well and have fantastic lender recommendations!
