The first step in buying a home is applying for a mortgage. Once you’ve done this, there are some key things to keep in mind. While it’s exciting to start thinking about moving in and decorating, the time during application process to closing is not the time to be making any big purchases. Here are a few things you must avoid doing after applying for your home loan.
Avoid Depositing Large Sums of Cash
Your lender will need to source your money, and cash isn’t easily traceable. Always discuss the proper way to document your transactions with your loan officer before depositing any amount of cash into your accounts.
Never Make Any Large Purchases
Any large purchases can be red flags for lenders, not just home-related ones. any new debt will create higher debt-to-income ratios (how much debt you have compared to your monthly income) and could disqualify you from your loan as higher ratios make for riskier loans. Resist the temptation to make any large purchases, even for furniture or appliances, until after we’ve closed on your home.
Avoid Co-Signing on Loans for Anyone
Anyone who co-signs for a loan makes themselves accountable for that loan’s success and repayment. With that obligation comes higher debt-to-income ratios as well. Although you’re not the one making the payments, your lender will have to count the payments against you.
Avoid Switching Bank Accounts
Lenders need to source and track your assetsand this task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.
Avoid Applying for New Credit
Whether it’s a new credit card or a new car, your credit will be pulled and run. 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 mortgage interest rate and possibly even your eligibility for approval.
Avoid Closing Any Accounts
You may believe having less available credit makes you less risky and more likely to be approved, however this is false. 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. When you close any accounts, this has a negative impact on both of those aspects of your score.
Never Hid the Past
Never omit debt or liabilities from your loan application such as past evictions, foreclosures, bankruptcies, or repossessions not matter how long ago they happened. Anything omitted WILL be discovered so best to disclose it right away!
In Short, Consult an Expert
To sum it up, be upfront about any potential changes 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 immediately. Ultimately, it’s best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.
Bottom Line
We all want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make any major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.
