There are several important considerations to make when you’ve applied for a mortgage to buy a home. 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.
Avoid Making Large Cash Deposits
Cash is difficult to trace, 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 mortgage. Avoid the urge to make any significant purchases, including those for appliances or furnishings.
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 obligation. Your lender will have to count the payments against you even if you pledge that you won’t be the one making them.
Don’t Switch Bank Accounts
Lenders must locate and keep track of your 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 Accounts
Whether it’s a new credit card or a new car, it doesn’t matter. Your FICO® score will be impacted if you have numerous financial institutions (mortgage, credit card, auto, etc.) pull your credit report. Lower credit scores may affect your ability to obtain a mortgage and potentially your interest rate.
Don’t Close Any Accounts
Many buyers 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.
In conclusion, be honest with your lender while discussing any adjustments. 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.
You want everything to go as smoothly as possible when you buy a house. Do not forget to speak with your lender, who is competent to explain how your financial actions may affect your mortgage, before you make any significant purchases, money transfers, or life changes.