Congratulations! You’ve been approved for a mortgage loan and your offer on that hot new property has been accepted. Whether you’re a first-time homebuyer or a seasoned investor, it’s important to keep in mind the effects your financial behavior can have on your approval all the way to closing.
Not so Fast to Furnish!
Don’t go to your nearest furniture store to stock up on Pinterest worthy living room décor. A “no score” credit report will be pulled right before closing on your new home. A big purchase, clearing money out of your checking account, or taking out store credit could jeopardize your home loan.
This seems like a no-brainer, but job transitions happen all the time. Do you hate your current job? Try to hold off looking for a new job until your loan closes. Since income is calculated differently for each type of earner, such as an hourly or salaried position vs. full commission, a transition could cost you your loan. A mortgage views stability as the ability to pay off your loan. The ideal scenario is to maintain the job that you were in when you were approved for the loan. If you change employment during this short window, make sure it comes with a nice pay increase, as employment is a key qualification for approval on a home loan.
Be Stingy With Your Credit.
Helping family is important, but you’re buying a house. Co-signing a loan is a financial obligation that increases your debt to income ration, regardless of who the primary may be. If the primary is unable to pay, the lender then turns to you as the co-signer to fulfill the agreement. Also, don’t take out any other loans or open new lines of credit. Any of these could increase your interest rate on your new mortgage, or even completely disqualify you from finalizing the loan.
Don’t Move Banking Institutions.
Banks can be jerks, but tough it out. Just like showing job stability, your banking history and financial status is an important part of getting pre-approved. Even if another bank or credit union is offering a great perk to new customers, that great perk could disrupt everything. Once you’re pre-approved, avoid anything that may show you as a risk for the investors that will purchase your loan.
Pay On Time.
Keep your payments on all bills current, including credit cards, student loans, utilities, and any other monthly payments. The lender will look at your credit right before closing and if you’ve missed payments, you could lose the loan. Don’t make the mistake of thinking once you get a loan commitment that your credit won’t be verified again. Late payments show up quickly on credit reports.
Avoid Making Large Deposits.
When your loan application is reviewed, your bank statement history is part of that review. Typically, the most recent two months of activity are reviewed. The underwriters of the loan are looking for consistency and to see if you can make the payments of the loan. The other thing they’re looking for is potential fraud. If you have a large, irregular bank deposit, it might be an indicator that the money you’re planning to use for your down payment or closing costs could be coming from an unacceptable source.
Avoid Credit Inquiries.
Every time you apply for a credit card, a loan or sign up for a monthly service, a credit inquiry is made. These inquiries show up on your credit report. When a mortgage company sees inquiries, it assumes that you’re trying to take out more debt. This could raise your debt to income ratio, which could disqualify you for your loan.
The number of ways you can compromise your home loan may seem overwhelming. Just remember the window between pre-approval and closing on your home loan is a short period of time. By avoiding these mistakes, your loan process can be less stressful and even enjoyable. Before you know it, you’ll be signing for your new home.