Once you’ve found your dream home and applied for a mortgage, there are some key things to keep in mind before you close. It’s exciting to start thinking about moving in and decorating your new place, but before you make any large purchases, move your money around, or make any major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.
Here’s 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 isn’t 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 Home.
New debt comes with new monthly obligations. People with new debt have higher debt-to-income ratios. Since higher ratios make for riskier loans, qualified borrowers may end up no longer qualifying for their mortgage.
3. Don’t Co-Sign Other Loans for Anyone.
When you co-sign, you’re obligated. With that obligation comes higher debt-to-income 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 much 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 possibly even your eligibility for approval.
6. Don’t Close Any Credit Accounts.
Some buyers mistakenly believe that reducing their available credit makes them appear less risky and increases their chances of approval. However, this belief is incorrect. A significant aspect of your credit score involves the duration and extent of your credit history, not just your payment track record, and the proportion of your total credit utilization to available credit. Closing accounts negatively influences both of these factors contributing to your score.
Bottom Line
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.
