What NOT to Do After Applying for a Home Loan

What NOT to Do After Applying for a Home Loan

 

Congratulations!  You’ve applied for a home loan and are gearing up to purchase a house!  You’re probably getting excited to move in and decorate and make this house the HOME you’ve always dreamed of.  But hold that thougt! There are some key things to keep in mind before your loan closes.  Read on for a list of things you may not realize you need to avoid after applying for your home loan.

Don’t Deposit Large Sums of Cash

Your lender needs to be able to track and verify the source of all your money, and cash is not easily traceable.  Discuss the proper way to document your transactions with your loan officer before you deposit any amount of cash into your accounts.

Don’t Make Any Large Purchases

Any large purchases, not just home-related purchases, can be red flags for lenders.  When you make any large purchase on credit, it increases your debt-to-income ratio, which is how much debt you have compared to your monthly income.  Because higher ratios make for riskier loans, a large purchase could disqualify you for the mortgage you’ve been approved for.  Wait until after your loan closes and all the documents are signed and you are safely on the other side of the transaction.

Don’t Cosign Loans for Anyone

When you cosign for a loan, you are making yourself accountable for the repayment of that loan.  That obligation puts you on the line and increases your debt-to-income ratio.  Even if you promise that you are not the one who will be making the payments, your lender will have to count the payments against you.

Don’t Switch Bank Accounts

As previously mentioned, lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. 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.

Don’t Close Any Accounts

Many homebuyers believe that having fewer credit cards makes them more likely to be approved for a loan.  This is not true.  A major component of your score is the length and depth of credit history (as opposed to only your payment history) and the total usage of credit as a percentage of available credit. Closing a credit account will have a negative impact on both of those aspects of your score. Discuss with your lender or a credit professional before you totally pay off a credit card, as well, because the amount you pay down may also have a negative impact on your score.

Do Discuss Changes with Your Lender

Your lender is advocating for your behind the scenes, and they need to know about any changes that occur or that your expecting to occur.  Changes in income, assets, and credit should be reviewed with your lender so they can guide your through these changes to make sure they are executed in a way that ensures your loan will still be approved.  If your job or employment status has recently changed, 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.

The Take-Away

Everyone wants their home purchase to go as smoothly as possible. Your lender is your lifeline to that end.  Remember, before you make any large purchases, move your money around, or make major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.  If you would like to discuss your options or plan for a mortgage, reach out to our team of mortgage experts today.

 

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