Finding the perfect house is an exciting milestone in your life. But before you get on with the preparation, here are some important things to avoid after applying for a mortgage for smooth sailing.
1. Watch Out for Large Cash Deposits
Lenders like to see a clear trail of your money so that they have a clear picture of what they are getting into. So, steer clear of depositing large amounts of cash into your bank account. However, if you still need to make such deposits, make sure to consult your loan officer first.
2. Stick to Your Bank Account
Loan providers track your assets, and they want to see consistency in the record. So, the best option is not to change your bank account during this critical time. Try to keep things simple and avoid transferring money to a new account.
3. Do Not make Bug Purchases
As tempting as it might seem, furnishing your new home or getting that shiny new car can take a back seat for the moment. Making significant purchases only increase your monthly debt, which can negatively impact your debt-to-income ratio. For lenders, this ratio is serious, as it affects your ability to repay the mortgage.
4. Do Not Change Jobs and Stabilize Your Payment Method
It is important to note that loan providers pay close attention to your income source and earnings. It is necessary to not switch jobs frequently or change to a commission-based income during this time. Lenders like stability and any significant changes to your employment status could raise concerns.
5. Be Cautious with Co-Signing
Be careful while helping someone else by co-signing on a loan. Although it is a kind gesture, it can come back to haunt you. When you co-sign, you automatically take the responsibility to ensure the payments are made on time, and it is treated as new debt by lenders.
6. Steer Clear of New Credit Applications
We understand, it may seem tempting to take advantage of that “20% off” offer when you are on the road to apply for a new credit card. However, opting for multiple credits in a short period can impact your credit score. And guess what? Your credit score plays a crucial role in determining your mortgage interest rate and eligibility.
7. Do Not Rush to Close Credit Accounts
Some people believe that closing credit accounts will improve their chances of approval. But here’s the thing – lenders also consider the length and depth of your credit history. Closing accounts can actually have a negative impact on your credit score, so it’s better to keep those accounts open.
8. Pay Your Bills on Time Or stay Ahead Of Your Game
Timely bill payment is crucial, especially during the mortgage application process. Even a single late payment can significantly lower your credit score and ultimately could mean losing your chance at getting the dream home you’ve set your eyes on.