Woohoo! Your offer was accepted! Your roll of emotions spans from excitement to anxiety and doubt. As you get closer to closing, you even start thinking about moving in and decorating. STOP! There are some key things to keep in mind during this time. Here’s a list of things you may not realize you need to avoid after applying for your home loan.
Change of Employent
Changing jobs can affect your loan approval. Your employment history and income are paramount to your ability to make your payments. If you plan to change jobs during the mortgage application process, it is important to tell your lender as early on as possible. Many lenders will do a final check to verify your employment and income haven’t changed since your final loan approval was issued. While changing jobs during your mortgage application does not always affect your ability to qualify for a mortgage loan, some changes can be more impactful than others.
Depositing Large Sums of Cash
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.
Large Purchases
New House, New Car, New Furniture Right? NO! New debt is a red flag to lenders and any large purchases could disqualify you from your loan. People with new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgage. Even purchasing with cash may impact the reserve that your lender may require. Its best to resist the temptation to make any large purchases, even for furniture or appliances. If it is absolutely necessary to make a purchase, consult your loan officer BEFORE purchasing to see how this will impact your approval.
Cosigning Loans
When you cosign for a loan, you’re making yourself accountable for that loan’s success and repayment. 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.
Switching Bank Accounts
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.
Applying 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.), it will have an impact on your FICO® score. Lower credit scores can determine your interest rate and possibly even your eligibility for approval.
Closing Accounts
Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. 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 aspects of your score.
Do Discuss Changes with Your Lender
Be upfront about any changes that occur or you’re expecting to occur when talking with your lender. Blips 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. Ultimately, it’s best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.
Bottom Line
You want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.