Avoid These Common Mistakes After Applying for a Mortgage

If you’re preparing to purchase a home, it’s thrilling to envision moving in and personalizing your space. However, it’s crucial to consider key factors after applying for your mortgage and before the closing process. Here’s a checklist to keep in mind when applying for your home loan, ensuring a smooth homebuying journey.

Don’t Deposit Large Sums of Cash

Lenders require a clear source for your funds, and cash transactions lack easy traceability. Before depositing any cash into your accounts, it’s essential to consult your loan officer to understand the appropriate method for documenting these transactions.

Don’t Make Any Large Purchases

It’s not limited to home-related purchases that may jeopardize your loan approval; any substantial expenses can raise concerns for lenders. Individuals acquiring new debt often experience elevated debt-to-income ratios, indicating a higher level of risk for loans. This increased risk could lead to disqualification for a mortgage. It’s advisable to refrain from making significant purchases, including furniture or appliances, to maintain a favorable financial profile during the mortgage application process.

Don’t Cosign Loans for Anyone

Cosigning a loan entails taking responsibility for its success and repayment, leading to elevated debt-to-income ratios. Despite assurances that you won’t be responsible for payments, lenders will factor in this obligation, potentially impacting your eligibility for a mortgage. It’s essential to be cautious about cosigning, considering its implications on your financial profile during the mortgage application process.

Don’t Switch Bank Accounts

Don’t Apply for New Credit

Whether it’s obtaining a new credit card or purchasing a new car, diverse financial inquiries, including mortgage, credit card, and auto-related, can impact your FICO® score. Lower credit scores may influence your interest rate and potentially affect your eligibility for approval. It’s crucial to be mindful of the broader financial impact of multiple credit-related activities on your credit scores.

Don’t Close Any Accounts

Contrary to a common misconception among buyers, reducing available credit does not necessarily enhance approval chances. Your credit score’s significant components include the length and depth of your credit history, along with your total credit usage as a percentage of available credit. Closing accounts may adversely affect both aspects of your credit score. It’s essential to understand the nuanced impact of reducing available credit on these critical score components.

Do Discuss Changes with Your Lender

Transparently communicate any changes or anticipated developments with your lender to maintain the approval trajectory of your home loan. Fluctuations in income, assets, or credit should be proactively addressed to secure approval. If there have been recent changes in your job or employment status, promptly inform your lender. Open and thorough communication with your loan officer before making any financial moves is crucial for a successful home loan process.

Bottom Line

Ensure a seamless home purchase by seeking guidance from your qualified lender before making significant financial decisions. Consulting with a lender, who is well-versed in explaining how your financial choices might affect your home loan, is crucial before making large purchases, transferring funds, or undergoing major life changes. This proactive approach contributes to a smoother and more successful homebuying experience.