Don’t Sabotage Your Mortgage Application

Getting pre-approved for a mortgage is one of the first steps toward homeownership. But a lot happens after that initial pre-approval, and things can derail if you aren’t careful. Staying consistent is important when you’re closing on a home. Changes to your income, debt, credit, or assets during that process can sabotage your mortgage application. Here are the things you need to avoid before closing on your home loan.

Don’t make big purchases

While you may need furniture and appliances for your new home, don’t buy them just yet. Accruing more debt will change your debt-to-income ratio. This can be a red flag for your lender, and they may deny your loan as a result.

Don’t miss payments

Your credit history is an important part of determining whether or not you qualify for a loan. Make sure to keep current on all your payments while you’re waiting to close. Missed payments are another red flag for lenders.

Don’t change accounts

Your lender will be tracking your assets and your bank accounts during the closing process. If you change bank accounts midway through the process, this can make their job much more difficult. If you must change accounts, then talk with your lender before making the switch.

Don’t apply for new credit

Another thing that could sabotage your mortgage application is applying for new credit. Your credit score can take a hit when you apply for new credit, which can change the interest rate you qualify for on your mortgage. It can also affect your eligibility, so don’t apply for a new credit card or take out a loan for a car.

Don’t close lines of credit

In addition to not opening new lines of credit, you should also not close existing lines of credit. While it may seem like you’d be less of a risk if you closed accounts you aren’t using, it actually can hurt you. Your lender will be evaluating your credit history so they can see whether or not you make your payments on time. Keeping these unused accounts open actually helps to establish your creditworthiness.

Don’t get a new job

Your lender wants to know that you’re going to be able to make your monthly payments. Any changes to your employment can set off alarm bells and sabotage your mortgage application. If your income changes during the approval process, it may result in adjustments to how much you’re approved to borrow.

Don’t deposit cash

Lenders need to be able to trace your money. When you make a large cash deposit, there is no way for them to trace where that money came from. They might assume that you took out another line of credit. Any money that is deposited during your loan approval process must have a paper trail and a clear explanation. When in doubt, talk with your lender about how money should be deposited.

Don’t co-sign a loan

Finally, even though you may want to help out a loved one, don’t co-sign any other loans during your approval process. Even though that is not your debt, you are on the hook for the payments should the primary borrower default.

Compliments of  Brandon Begley | The Begley Team | Berkshire Hathaway California Properties | Demand Excellence | Over 1,600 homes sold since 1975  (818) 368-0290 | www.BegleyTeam.com | Voted top Los Angeles REALTORS® by Los Angeles Magazine- 2012-2020. *Verified by production and client interviews