If youre getting ready to buy a home, its exciting to jump a few steps ahead and think about movingin and making it your own. But before you get too far down the emotional path, there are some key things to keep in mind after you apply for your mortgage and before you close. Heres a list of things to remember when you apply for your home loan.
DontDeposit Large Sums of Cash
Lenders need to source your money, and cash isnt easily traceable. Before you deposit any cash into your accounts, discuss the proper way to document your transactions with your loan officer.
DontMake Any Large Purchases
Its not just home-related purchases that could disqualify you from your loan. Any large purchases can be red flags for lenders. People with new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgage. Resist the temptation to make any large purchases, even for furniture or appliances.
DontCosign Loans for Anyone
When you cosign for a loan, youre making yourself accountable for that loans success and repayment. With that obligation comes higher debt-to-income ratios as well. Even if you promise you wont be the one making the payments, your lender will have to count them against you.
DontSwitch Bank Accounts
Lenders need to source and track your assets. That task is much easier when theres consistency among your accounts. Before you transfer any money, speak with your loan officer.
DontApply for New Credit
It doesnt matter whether its a new credit card or a new car. When your credit report is 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.
DontClose Any Accounts
Many buyers believe having less available credit makes them less risky and more likely to be approved. This isnt true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those parts of your score.
DoDiscuss Changes with Your Lender
Be upfront about any changes that occur or youre 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, its best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.
Bottom Line
You want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make major life changes, be sure to consult your lender someone whos qualified to explain how your financial decisions may impact your home loan.
