What to Avoid After Applying for a Home Loan
Once you have applied for a mortgage home loan, be careful not to do any of these things that could impact whether your loan can be approved.
Don’t Co-Sign Loans for Anyone
When you co-sign a loan, you are making yourself responsible for that loan’s repayment. With that obligation comes a higher debt-to-income ratio. Even if you state you will not be the one making the payments, your lender will have to count the debt against you.
Don’t Deposit Large Sums of Cash
Lenders need to source your money, and cash is not easily traceable. Before you deposit any large sums of cash into your account, discuss how your transaction should be documented with your mortgage lender.
Don’t Switch Bank Accounts
Mortgage lenders need to source and track your assets during the pre-underwriting and underwriting loan processing steps. That task will go much smoother when there is consistency among your accounts.
Don’t Make Any Large Purchases
Any large purchases that are financed can be red flags for lenders. People with new debt have a higher debt-to-income ratio. Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgage loans. Resist the temptation to make any large purchases, even for furniture or appliances, until the loan is closed.
Don’t Apply for New Credit
It doesn’t matter whether it’s a new car purchase or application for a credit card, when you have a hard credit inquiry it will impact your FICO® score. Lower credit scores can determine your mortgage interest rate and possibly even your eligibility for loan approval.
Don’t Close Any Accounts
Buyers sometimes think that having less available credit makes them less risky and more likely to be approved for a loan. This isn’t necessarily true. A major component of your credit score is your length and depth of credit history and your total credit usage as a percentage of your available credit. Closing accounts has a negative impact on both of those aspects of your credit score.
Bottom Line, Consult an Expert
You want your home loan application to go as smoothly as possible. Before you make any significant financial changes, be sure to consult your lender – someone who is qualified to explain how your financial decisions may impact your home loan.
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