Once you’ve found the right home and applied for a mortgage, there are some key things to keep in mind before you close. You’re undoubtedly excited about the opportunity to decorate your new place, but before you make any large purchases, move your money around, or make any major life changes, consult your lender – someone who is qualified to tell you how your financial decisions may impact your home loan.
Below is a list of things you shouldn’t do after applying for a mortgage. They’re all important to know – or simply just good reminders – for the process.
1. Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender. 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 Like 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 then sometimes qualified borrowers no longer qualify.
3. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you’re obligated. With that obligation comes higher ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.
4. Don’t Change Bank Accounts. Remember, lenders need to source and track your assets. That task is significantly 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. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be impacted. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
6. Don’t Close Any Credit Accounts. Many buyers believe having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants of your score.
7. Don’t Change Your Job. You can’t always prevent changes from happening, but do your best not to change or quit your job during your loan process. Even changing positions can cause complications. Your lender wants to know that your job is secure and one of the last things they will do before giving final approval on your loan is to call your employer to make sure you still work there. If you can’t help the change from happening, let your lender know immediately.
8. Don’t Miss a Payment. Keep making your payments on time, including any existing mortgages. Note that you must keep paying that mortgage even if you are refinancing. Don’t miss any payments on credit cards or other accounts — this may affect your credit and can cause issues with getting your loan.
9. Don’t Send Funds to Escrow From the Wrong Account. When you send your initial deposit and down payment to escrow, be sure to send them from accounts your lender already knows about! Lenders will take issue with monies that are sent from a source outside your bank accounts, including friends or business partners.
10. Don’t Start Renovating. Do not start a construction project of any scale during this process. Wait until you have closed!
Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. The best plan is to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.