If you need assistance, please call 703-743-4410

Things to Avoid While Applying For a Mortgage

Friday, December 30, 2022   /   by Laura Larson

Things to Avoid While Applying For a Mortgage

b3.jpg
Even while it's wonderful to start planning for your future home purchase. Following your loan application, there are a few things you should probably avoid.
 
Avoid making large cash deposits.
Cash is hard to track down, and lenders need to know where you got your money. Talk with your loan officer about how to properly record your transactions before you deposit any money into your accounts.
 
Avoid Making Any Major Purchases
You could lose your loan if you make purchases that are not strictly related to your home. Lenders may raise concerns about any sizable purchases. Debt-to-income ratios are higher for those with new debt (how much debt you have compared to your monthly income). Because riskier loans have higher ratios, consumers might no longer be eligible for their mortgages. Avoid the urge to make any significant purchases, including those for appliances or furnishings.
 
Don't Cosign for Anyone's Loans
You assume responsibility for the loan's success and repayment when you cosign for it. Higher debt-to-income ratios result from that obligation. Your lender will have to count the payments against you even if you pledge that you won't be the one making them.
 
Avoid Changing Bank Accounts.
Lenders must locate and keep track of assets. When all of your accounts are consistent, that work is significantly simpler. Speak with your loan officer prior to making any financial transfers.
 
Avoid Requesting New Credit.
Having your credit report checked by businesses in several financial platforms (mortgage, credit card, auto, etc.) will affect your FICO® score, regardless of whether you're applying for a new credit card or a new car. Lower credit scores can affect your interest rate and perhaps even your approval eligibility.
 
Keep All Open Accounts
Many purchasers think they are less risky and more likely to get approved if they have less access to credit. That is untrue. Your total credit usage as a percentage of available credit and the length and depth of your credit history (as opposed to merely your payment history) both play a significant role in determining your credit score. Both of those parts of your score are lowered by account closures.
 
Communicate any changes to your lender.
When speaking with your lender, be up about any changes that take place or that you anticipate taking place. Any changes to your income, assets, or credit should be carefully considered and handled so that your house loan can still be granted. Inform your lender as well if your employment situation has changed recently. In the end, it's always preferable to be completely honest and open with your loan officer before making any financial decisions.
 
Bottom Line
If you have made up your mind and want to buy a home, you want everything to go as smoothly as possible. Remember to speak with Laura Larson who can recommend fantastic local lenders—ready to explain how your financial actions may affect your home loan—before you make any significant purchases, money transfers, or other life changes.