Avoid These Common Mistakes After Applying for a Mortgage
When preparing to purchase a home, the anticipation of moving in and personalizing the space can be thrilling. However, before allowing emotions to take over, it’s crucial to consider some essential factors after applying for your mortgage and before finalizing the deal. Here’s a checklist of important reminders during the home loan application process.
Don’t Deposit Large Sums of Cash
Lenders require verification of your funds, and cash can be challenging to track. Before depositing any cash into your accounts, it’s important to consult with your loan officer about the appropriate method for documenting these transactions.
Don’t Make Any Large Purchases
It’s not solely purchases related to homeownership that may compromise your loan approval; any significant expenditures can raise concerns for lenders. Individuals acquiring new debt often experience an increase in their debt-to-income ratios, reflecting the proportion of debt relative to monthly income. Elevated ratios pose higher risks for lenders, potentially disqualifying borrowers from their mortgages. It’s advisable to refrain from making substantial purchases, including furniture or appliances, to maintain financial stability during the loan application process.
Don’t Cosign Loans for Anyone
Cosigning a loan means you’re assuming responsibility for its repayment and success. This commitment results in an increased debt-to-income ratio. Regardless of any assurances you give about not being the one to make the payments, your lender is obligated to consider these obligations when evaluating your financial situation.
Don’t Switch Bank Accounts
Lenders require a consistent and traceable record of your assets, which is more straightforward when there is uniformity among your accounts. Before initiating any fund transfers, it is advisable to consult with your loan officer.
Don’t Close Any Accounts
Some buyers mistakenly think that reducing their available credit makes them appear less risky and increases their chances of approval. However, this is not accurate. A significant factor in your credit score is the length and depth of your credit history, not just your payment history, along with the total utilization of credit as a percentage of available credit. Closing accounts can adversely affect both aspects of your credit 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.
Bottom Line
For a smooth home purchase process, it’s crucial to exercise caution. Before making substantial purchases, transferring funds, or undergoing significant life changes, it is advisable to consult your lender. They are qualified to provide insights into how your financial decisions might affect your home loan, ensuring informed and prudent choices throughout the process. Connect with us!
