While researching information about buying your home, you may have read about all the things you need to do before applying for home loan.
Even with all the available information, it is still quite common to be unaware of some important things not to do before, or during your home loan application process.
Below are some of the potentially costly mistakes to avoid when applying for a mortgage to buy your home:
Change Jobs, Become Self-Employed or Quit Your Job
Pay stubs are needed covering a 30 day period at your present job.
If you leave a salaried job and become self-employed/commissioned you would typically have to wait 2 years.
Employment verification is always done up to the day of closing.
Co-sign a Loan For Anyone
Any changes to your credit report or status could negatively affect your ability to close a loan or any other types of loans too.
Co-signing on any type of car loan, student loans or any other loans will result in inquiries to your credit and additional financial obligations.
Omit Debts or Liabilities From Your Loan Application
Be very honest about all of your debts and liabilities early in the loan process.
Everything is checked and double checked so any omissions will likely turn up at some point and could jeopardize buying your home.
Use Charge Cards Excessively or Make Any Late Payments
Excessive use of credit cards can have negative effects on your credit score.
Inquiries alone may lower it and balances greater than one third of the available credit limit can also lower your credit rating.
Any late payments will lower your score significantly regardless of the amount due.
Originate Any Inquires Into Your Credit
As mentioned before, multiple inquires on your report will decrease your score.
Credit is always refreshed within 7 days prior to closing and inquires will result in more documentation being required which may delay your closing.
Close Credit Accounts or Change Bank Accounts
Once initially approved for the loan, it is vital to not change anything that doesn’t really need to be changed, bank accounts and credit accounts included.
Any changes will most likely decrease your credit score immediately due to the date of last activity becoming recent.
If you want to pay off old accounts or change banks, it is always best to do it after closing.
Buy a Vehicle
Applying for credit to purchase a vehicle will result in an inquiry to your credit report.
This will decrease your score, decrease the amount of money you can qualify to borrow and possibly make it more expensive.
Make Large Deposits Without First Checking With Your Mortgage Consultant
Abnormal deposits or large deposits other than regular payroll into checking, savings or any financial account must have sources verified and will result in more documentation being required.
Spend Money You Have Set Aside For Closing
Maintaining the money in your account for down payment and closing costs is critical, but so are reserves after closing.
Spending this money prior to closing could result in a denial of your loan.
Buy Furniture, Appliances or Household Items Before Closing
Although you may be anxious to furnish your new home, during the loan process is just not the right time.
Large purchases causing deductions in your bank account, inquires on your credit report or additional debt on your credit cards could cause your closing to be delayed or even denied.
It is always best to wait until after you close to purchase those items.
Just remember that when it comes to applying and obtaining your home loan, the more consistent your finances, the better. It is very important to not make any major changes to your finances during the entire process.
You may think that making changes will help improve your chances, but you could actually be making a mistake that will cost you the home.
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