Dos and Don'ts During the Loan Process

Real Estate Agent with CENTURY 21 WESTERN REALTY


Each lender and each loan program has different guidelines they must follow. You should not do anything that will have an adverse effect on your credit score while your loan is in process. We know it's tempting...If you're moving into a new home, you might be thinking about purchasing new appliances or furniture, but this is really not the right time to go shopping with your credit cards. You'll want to remain in a stable position until the loan closes and give us the opportunity to help you lock in the best interest rate we can possibly get for you.

DON'T APPLY FOR NEW CREDIT OF ANY KIND - If you receive invitations to apply for new lines of credit, don't respond. If you do, that company will pull your credit report and this will have an adverse effect on your credit score. Likewise, don't establish new lines of credit for furniture, appliances, computers, etc.

DON'T PAY OFF COLLECTIONS OR CHARGE-OFFS - Once your loan application has been submitted, don't pay off collections unless the lender specifically asks you to in order to secure the loan and we recommend that you do everything possible to negotiate deletion in exchange for payment. Generally, paying off old collections causes a drop in the credit score. The lender is only looking at the last two years of activity.

DON'T CLOSE CREDIT CARD ACCOUNTS - If you close a credit card account, it can affect your ratio of debt to available credit which has a 30% impact on your credit score, and also your length of credit history which has a 15% impact on your credit score. If you really want to close an account, do it after you close your mortgage loan.

DO JOIN A CREDIT WATCH PROGRAM - Your bank, credit union or credit card company may be able to provide you with a free credit watch program that can alert you to any changes in your credit report. This can be a safeguard to help you intervene before the underwriter sees a problem.

DO STAY CURRENT ON EXISTING ACCOUNTS - Late payments on your existing mortgage, car payment, or anything else that can be reported to a CRA can cost you dearly. One 30-day late payment can cost anywhere from 50 to 100+ points on your credit score. .

DO CONTINUE TO USE YOUR CREDIT AS YOU NORMALLY WOULD - Red flags are easily raised within the scoring system. If it appears you are diverting from your normal spending patterns, it could cause your score to go down. For example, if you've had a monthly service for Internet access billed to the same credit card for the past three years, there's really no reason to drop it now. Again, make your changes after the loan funds.

Jerry Newman
Brown Realty, 210-789-4216, - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

Sounds like some great advice William. I tell my buyers these things early in our first or second meetings. And, especially, when we first go under contract with an offer. Great post!!

Feb 27, 2011 02:18 AM
Jim Courtney
OklaHomes Realty, Claremore Oklahoma - Claremore, OK

Isn't this the truth! I've been telling my buyers this same advice ever since I had a sweet family lose their loan because they bought something the day of closing. Just laat year I had a set of buyers lose their loan (and hone!) bcause they bought a Rainbow Vaccuum. What you couldn't wait two weeks with dirty floors?? I think this is someof the best advice new loan applicants can ever receive. :)

Feb 27, 2011 02:24 AM
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

William....good stuff here.  The biggest mistake that I see are folks going out and buying stuff, or.... more than likely, in an attempt to improve their credit by themselves, they close accounts.   Great advice!

Feb 27, 2011 02:24 AM