Things to Avoid After Applying for a Home Mortgage
Following your mortgage application, there are a few important considerations. Even though it's thrilling to begin considering moving in and decorating, use caution when making any significant purchases. Following your loan application, there are a few things you should probably avoid.
1. Don’t Deposit Large Sums of Cash
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.
2. Don’t Make Any Large 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). Higher ratios result in riskier loans, therefore borrowers may find themselves losing their ability to obtain a mortgage. Avoid the urge to make any significant purchases, including those for appliances or furnishings.
3. Don’t Co-Sign Loans for Anyone
You take on responsibility for the loan's success and repayment when you co-sign for it. Higher debt to income ratios result from that responsibility. Your lender will have to count the payments against you even if you pledge that you won't be the one making them.
4. Don’t Change Bank Accounts
Remember, lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.
5. Don’t Apply for New Credit
Whether it's a new credit card or a new car, it doesn't matter. Your FICO® score will be affected if you have various financial institutions (mortgage, credit card, auto, etc.) pull your credit report. Poor credit scores can affect your interest rate and perhaps even your approval eligibility.
6. Don’t Close Any Accounts
Many purchasers think they are less risky and more likely to get approved if they have less accessible 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.
Every fluctuation in income, assets, or credit needs to 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. The best course of action is to completely explain your plans to your loan officer and discuss them with them before making any financial decisions.
You want your purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make any major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.
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