So you’re ready to apply for a mortgage. Some of you may even be further ahead of the game and have been pre-approved. Well think again! Here’s a checklist of things that you should avoid doing before your loan has closed.
1. Don’t buy or lease an auto! Lenders look carefully at your debt-to-income ratio. A large payment such as a car lease or purchase can greatly impact those ratios and prevent you from qualifying for a home loan.
2. Don’t move assets from one bank account to another! These transfers show up as new deposits and complicate the application process, as you must then disclose and document the source of funds for each new account. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. The lender can verify each account as it currently exists. You can consolidate your accounts later if you need to.
3. Don’t change jobs! If at all possible, try not to make a career move during the time between your mortgage application and the closing on the home you are purchasing. But, you ask, “What if it is a BETTER job, for MORE money, in a DIFFERENT field?” Still, try and wait until AFTER closing. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and may delay your closing.
4. Don’t buy new furniture or major appliances for your new home! If the new purchases increase the amount of debt you are responsible for on a monthly basis, there is the possibility this may disqualify you from getting the loan, or cut down on the available funds you need to meet closing costs.
5. Don’t run a TRW report on yourself! This will show as an inquiry on your lenders credit report. Inquiries must be explained in writing. Try to keep everything the same as far as credit goes as when you where initially pre-approved unless told different by your loan officer.
6. Don’t attempt to consolidate bills before speaking with your lender! The lender can advise you if this needs to be done. Also, do not pay off any old collection accounts on your credit report unless you were specifically told to do so by your mortgage professional.
Paying off old collection debt will often signal to the credit reporting agencies that there is new activity on an negative entry and actually lower your credit score.
7. Don’t pack or ship information needed for the loan application! Important paperwork such as W-2 forms, divorce decrees, and tax returns should not be sent with your household goods. Duplicate copies take weeks to obtain, and could stall the closing date on your transaction.
8. Don’t stop making your regular monthly payments after applying for a mortgage. Borrowers refinancing their home to payoff other debts sometimes stop making their regular monthly payments because they are going to payoff the debt. This can cause problems during the loan process because not making payments on time may hurt your credit rating. Lower credit scores may cause your interest rate to go up or result in you being denied credit.
9. Don’t ignore to tell your mortgage broker about any material changes in the purchase agreement you and the seller come to agree upon after the mortgage process has begun. A slightly lower sale price can alter the loan-to-value ratio and requires re-submission of loan documents. Your mortgage broker and lender have to be made aware if any addendum is later attached to the purchase contract.
10. Don’t co-sign on a loan for anyone else. Although you will not be making the payment, the lender still views this as your debt.
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