Once you’ve found the right home and applied for a mortgage, there are some key things to keep in mind before you close on your home. You’re undoubtedly excited about the opportunity to decorate your new place, but before you make any large purchases, move your money around, or make any major life changes, consult your lender. They will be able to tell you how your financial decisions will impact your home loan.
Here’s a list of things you shouldn’t do after applying for a mortgage.
- Don’t Deposit Cash into Your Bank Accounts. Lenders need to source your money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
- Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home. New debt comes with new monthly obligations and New obligations create new qualifications. When you incur a new debt, your debt to income ratio becomes higher and Higher ratios make for riskier loans, and then sometimes qualified borrowers no longer qualify.
- Don’t Co-Sign Other Loans for Anyone. When you co-sign, you’re obligated. With that obligation comes higher ratios as well.
- Don’t Change Bank Accounts. Remember, lenders need to source and track your assets.
- Don’t Apply 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, your FICO® score will be impacted. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
- Don’t Close Any Credit Accounts. Many people believe that having less available credit makes them less risky and more likely to be approved. That’s not 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 determinants of your score.
The Bottom Line is, any blip 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. The best plan is to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature. You definitely don’t want to jeopardize the loan process!
