Mortgage Do’s & Don’ts

You’ve found your dream home, applied for and got approved for a mortgage, and no doubt are excited to decorate, furnish, and make your new home yours! Your excitement is warranted for sure; however, before making large purchase or moving money around, you should consult your lender or someone who can detail how your financial decisions may impact your mortgage.

There are six important things to remember after you have applied for your loan.

  1. Don’t Deposit Large Amounts of Cash into Your Bank Account. Speak to your lender first. Lenders need to be able to show from where your money originates. If you need to deposit more cash than typical, discuss this with your loan officer so they can properly document the transactions.
  2. Don’t Make Any Large Purchases. For example, it’s not the right time to buy a new car or furniture for your new home. Even if you plan to payoff whatever amount you charge to a credit card, it can still adversely affect your debt-to-income ratios. A higher ratio could cause you to become ineligible for the mortgage for which you thought you qualified.
  3. Don’t Co-Sign for Anyone. Co-signing also can adversely affect your ratios. Even if you don’t intend to be making the payments, your lender still has to count these payments as your obligation.
  4. Don’t Change Banks. Again, lenders have to be able to determine where your assets are and track them. It makes the process much easier when your accounts are consistent.
  5. Don’t Apply for New Credit. It does not matter if you’re applying for a new credit card or a car, if your credit report is ran it can lower your FICO® score. A lower credit score can also have adverse consequences to your home loan.
  6. Don’t Close Credit Accounts. Many people believe having fewer accounts makes them more likely to be approved. This is absolutely false! A large component of your score is determined by length and depth of credit history, as well as your percentage of available credit. Closing credit accounts will negatively affect those aspects of your credit score.

Key Point

Any change in credit, assets, or income should be discussed with your loan officer when you are also trying to purchase a new home. If your job or employment status also happens to change, you need to share that with your loan officer as well. It is best to share your plans with your loan officer prior to doing anything drastic with your finances.