In this competitive real estate market, you don’t want to do anything that will jeopardize your chances of securing your dream home. Some folks can pay cash for a home, but you will need to apply for a mortgage if you are like most people in the US. If you have applied for a mortgage, there are some things you need to know so you don’t negatively impact your approval status. The home loan approval process is not as easy as most people think, and it can take some time to process all the information needed to get you cleared to close. As you navigate the loan approval process with your loan officer, there are some things you need to avoid!
What not to do during the loan process:
Don’t change jobs or the way you’re paid at the job
Your loan officer must track the amount as well as the source of your annual income. If possible, avoid becoming self-employed or changing from salary to commission during this time.
Don’t apply for new credit
It doesn’t matter whether it’s a new car or a new credit card. Your FICO score will be affected when organizations in multiple financial channels such as auto, mortgage, or credit card run your credit report. Low credit scores can affect your interest rate and even your eligibility for approval.
Don’t deposit large sums of cash into your bank accounts
Lenders are interested in sourcing your money, and cash is not very traceable. Before making any deposits in your accounts, consult with your loan officer on the proper documentation of your transactions.
Don’t co-sign a loan for anyone else
You become financially responsible for the loan when you co-sign for someone else, and this also creates a higher debt to income ratio for you. Even if you are not making the payments, the lender will still count the new debt against you.
Don’t make large purchases such as getting new furniture or a car
Adding new monthly bills brings new debt, and individuals with new debt will have a higher debt-to-income ratio. In the lender’s eyes, this makes for riskier loans, and in some cases, qualified borrowers will no longer qualify.
Don’t change bank accounts
Always keep in mind that lenders need to source and track your assets; consistency with your bank accounts makes this much more manageable. Consult with your loan officer even before transferring money between accounts.
Don’t close any credit accounts
Many borrowers in Massachusetts have the misconception that having less available credit reduces their risks, and if they close some accounts, they are more likely to be approved. This is wrong, a significant factor of your FICO score is the length and depth of your credit history, not just your payment history.
Any changes in assets, credit, or income should be reviewed and handled in a way that ensures you’ll be approved for your home loan. The best way is to be transparent and discuss any plans with your Massachusetts loan officer before making any significant financial decisions. Loan officers are skilled in guiding you through the process and increasing your home loan approval chances.