As a homebuyer, you don’t want anything to jeopardize your chances of closing on the home you’ve chosen, especially in a seller’s market. Many borrowers rely on mortgages to get into the home of their dreams. It’s important to prepare diligently so you can be a strong candidate. Getting approved is a marathon, not a sprint. Making any of the following mistakes could significantly impact your chances of getting a good rate or larger chunk of financing.
Here are things not to do before your loan closes:
1. DO NOT TAMPER WITH YOUR CREDIT
Your credit can be pulled at any time up to the closing of the loan. Negatively altering your score could also alter the terms of the deal or even demolish it altogether.
Closing accounts and applying for other credit lines or loans that pull credit history can impact your overall score. Also, accumulating significant amounts of more debt will increase your debt-to-income ratio, which may mean a higher rate or lower amount allotted on your loan. Experts recommend keeping credit utilization under 30% to maintain a good credit score.
In addition, do not miss any credit payments. Payment history is one of the most important factors in your credit score. Late payments on credit accounts can really hurt your reputation.
2. DO NOT CHANGE JOBS
While this may be finicky in the current market, it is wise to avoid switching jobs during the loan-approval process if you can manage. Career changes typically mean a change in income. This translates to changes in the amount you’re approved to borrow. You will also want to avoid changing from salary to commission or becoming self-employed during this time.
3. DO NOT MAKE ANY LARGE PURCHASES
We all know the rush of retail therapy, and when you’re looking forward to bringing your Pinterest board to life, it can be tempting to fill your cart with new furniture, appliances, and other pricey household items.
But charging substantial purchases will increase your debt-to-income ratio and the percentage of available credit in use. Not to mention it will put a dent into savings set aside for closing costs and applicable fees. Wait until after your mortgage is finalized to start adding things to your cart.
4. DO NOT CO-SIGN OTHER LOANS FOR ANYONE
When you co-sign, you are obligated to uphold payments if not carried through by the original borrower. By co-signing, you become partially responsible for that debt. Even if you will not be making any payments, your lender will be required to count the payments against you since your name will be footed on the bill.
5. DO NOT DEPOSIT CASH INTO YOUR BANK ACCOUNTS
Large deposits to your bank account sometimes indicate newly borrowed money, or in other words, a higher debt-to-income ratio. Any major changes in personal income, assets, or debt can alter the terms of your mortgage offer if they can’t be traced or explained. Lenders need to source their money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, make sure you discuss the proper way to document your transactions with your loan officer.
6. DO NOT CHANGE BANK ACCOUNTS
In the spirit of bank accounts, do not change banks. Remember, lenders need to source and track assets. This is significantly easier when there is consistency among your accounts. The simpler you can make it for your lender, the faster you can get approved. Before you even transfer any money, talk to your loan officer.