Do not quit your job
Applying for a home loan is a big deal! Congratulations on this new adventure. As your lender we will verify your employment and will need at least a month’s worth of pay stubs to prove your income. Therefore, if you change your employment, and possibly your in-come level, you will need to give the lender an additional month’s worth of pay stubs which could push back your closing date. Do your best to stay with your current employment throughout the entire process of purchasing your home. If you cannot avoid changing jobs, becoming self-employed, retiring, or you are moving for a new job, make sure to make all details immediately clear to your lender.
Do not change banks or bank accounts
Just like a lender checks your income stability, your lender will want to do the same for your banking history. Lenders require you to provide bank statements before closing oc-curs and if you change banks you will have to wait a month or two to get bank statements for your new accounts. If you do transfer your funds, make sure you have a paper trail. Also, it would be best to transfer any money you need for your mortgage costs into one account before you apply for a mortgage.
Do not buy anything that you have to finance
Buying big ticket items, including furniture, appliances, and vehicles, can increase your debt-to-income ratio which makes the lender question whether you can actually afford to pay them back.The reduction of your savings, or an addition of another loan, such as an auto loan, can severely disrupt your mortgage loan approval. Hold off on buying those big ticket items, even if you use cash, until you have secured and closed the loan.
Do not make late credit card payments
If your payment is later than 30 days it is added to your credit re-port, and because payment history makes up 35% of your score the late payments can significantly damage your credit score. Keep up your payments. Even if you get busy with the move, make sure you are keeping up the basic payments so your credit score remains intact and your payment history is solid.
Do not make large deposits you cannot explain
If large amounts of money are transferred or deposited it can make a lender wonder if you just took out another loan or co-signed a loan. This leads them to question if your debt is actually larger than what they originally thought. If you are getting a gift for your down payment or any of your closing costs, disclose this to your lender so you can appropriately handle the funds. Keep your bank account the same throughout the mortgage loan process. If there is a big change, make sure you have a detailed paper trail for all large deposits.
Do not use cash for your earnest money deposit
If you use a check to pay for your deposit you will immediately have a record of your payment, thus providing proof you have serious intentions to purchase the home. Keep a receipt of your payment by check. Keep those bank statements, tax returns, and any other Financial statements. If you are unsure whether or not to keep it, just throw it in the folder.
Do not co-sign a loan for anyone
Co-signing a loan could make the approval of the loan you need impossible. Part of the approval of your mortgage application is your credit score and the debt-to-income ratio. By being a co-signer you are putting your credit score at risk and increasing your debt-to-income ratio. Taking on more debt has the potential to disqualify you from being approved for the loan you need. The simple response is just do not do it. However, if you are considering co-signing a loan for a friend or your child, make sure to weigh your decision carefully or discuss it with your loan officer before taking the cap off the pen.
Do not inquire about new lines of credit
When you look for new lines of credit it translates into a higher risk for lenders because it gives the appearance you are bringing on more debt. Do not apply for or open any new lines of credit. If you are inquiring about credit related to your mortgage, it usually does not affect your credit score because it appears as if you are rate-shopping.
Do not exaggerate when applying for a home loan
If you exaggerate on your application and the lender discovers your error, it can lead to you being denied. If you cannot qualify for a loan you will not be able to buy your dream home!