The Do’s and Don’ts after Applying for a Mortgage
The Do’s and Don’ts after Applying for a Mortgage
Once you’ve found the right home and applied for a mortgage, there are some key things to keep in mind before you close. Here are six things to keep in mind after applying for a mortgage:
1. Speak with Your Lender Before Depositing Cash into Your Bank Accounts. Lenders need to source your money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
2. Don’t Make Any Large Purchases. Press pause before buying a new car or furniture for your new home. New debt comes with new monthly obligations. New obligations create new qualifications. People with new debt have higher debt-to-income ratios. Higher ratios make for riskier loans and can sometimes cause qualified borrowers to no longer qualify.
3. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you’re obligated. Even if you promise you won’t be making the payments, your lender will have to count the debt against you. This could cause your debt-to-income ratio to go up and, in turn, cause you to no longer qualify for your mortgage loan.
4. Don’t Change Bank Accounts. Remember that lenders need to source and track your assets. That task is significantly easier when your accounts are consistent. Before you transfer any money, speak with your loan officer.
5. Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When organizations in multiple financial channels (mortgage, credit card, auto, etc.) run your credit, your FICO® score will be impacted. Lower credit scores can affect your interest rate and even your eligibility for approval.
6. Don’t Close Any Credit Accounts. Many buyers wrongly believe having less available credit makes them less risky and more likely to be approved. Length and depth of credit history as well as percent credit utilization affect credit score. Closing accounts can hurt both your credit history and your percent utilization. If your credit score goes down, you may have to pay a higher interest rate and may even lose your qualification.
Bottom Line
Before doing anything financial in nature (taking on new debt, transferring large sums of money, and even switching jobs), talk to your lender!