AVOID THESE MORTGAGE MISTAKES
This all may seem like common sense, but you’d be surprised the number of people who ask these questions, or even worse don’t ask and inadvertently lose their mortgage approval. Many seemingly simple actions can hurt your chances or disqualify you from obtaining a mortgage or delay your closing while you clear them up.
You must assume that the lender will re-verify your employment, re-check your credit, re-verify your rental history to see if you’ve paid everything on time while under contract. They may also ask for updated bank statements, so make sure any money you told the lender you have is still in the same account.
If it’s your first mortgage or your tenth, review these common mistakes to learn or refresh your memory. Here’s what every potential home buyer should NOT do when seeking a mortgage:
Do NOT change jobs, move to self-employment or quit your job. If your job changes or you start a new career, you may have to wait before you’ll qualify for a mortgage. It could take up to two full tax filing years to be eligible to obtain a mortgage. Lenders want to see job and income stability, if there is a whiff of instability, your chances of qualifying will be significantly decreased. If you make a change while you’re under contract and awaiting closing, you may lose the mortgage you thought you had.
Do NOT purchase a new car or make any other large purchases. It could change your debt-to-income ratio, lower your credit score, or reduce the amount of the loan you qualify for.
Do NOT spend money you have set aside for closing. Most loans require a certain level of savings in “reserve” to qualify for a mortgage. Spending that money while under contract and before closing may result in loan denial or cause closing delays.
Do NOT cosign a loan for anyone. Any change to your credit report and credit status could negatively affect your ability to obtain a mortgage and close on your new purchase. Co-signing a car loan, student loan, credit card could result in inquiries on your credit report, which could lower your score. Even opening a joint bank account or getting a new phone carrier can affect your score.
Do NOT use credit cards excessively. This could result in a change in debt-to-income ratios, credit score and change the loan amount you qualify for.
Do NOT omit any liabilities or debts from your application. Providing all the necessary information to your loan officer is critical to ensuring a smooth process and an on time closing.
Do NOT buyer furniture, appliances or household items before you take possession of the property at closing. You may be excited and anxious to furnish your new home, but don’t do it until it’s yours. You could affect your reserves, debt-to-income ratios.
Do NOT make any credit inquiries. Inquiries into your credit (insurance quotes, changing phone carriers, applying for car loans, store credit cards or other credit card applications) may lower your credit score. A lower credit score could eliminate you from receiving the best rates and loan programs.
Do NOT make any large deposits before checking with your loan officer. Deposits that exceed the ‘normal’ payroll deposit patterns may cause delays to closing while the lender requests you to “source” those funds. Any gifts or other larger than normal deposit could cause processing delays or even loan denial. It’s not OK for family or friends to just give you money while under contract. Even moving your own money between accounts can cause a problem, discuss with your loan officer before making any transfers.
Do NOT change bank accounts. Lenders require two months of bank account history, new accounts won’t show that history and could cause a problem.
Do NOT make any late payments. Your credit will be checked right before closing, so any recent late payments could affect your credit score, again causing denial or a change in rate or loan program.