You’ve found your dream home. Congratulations! Now the waiting begins as you work toward your closing date. Before you get too excited and start daydreaming about life in your new home, make sure you think about the things you should avoid doing that could make your mortgage plans fall through.
Brad Benham, vice president and senior mortgage loan officer at Towne Mortgage of the Carolinas, said a mortgage can be denied if people make these common mistakes. “I’ve had people who are under contract on a home or they’ve been pre-approved and something changes,” he said. “Let’s focus on the goal, which is to get in the house.”
Therefore, we recommend avoiding the following 6 mistakes after you’ve applied for a mortgage. Following this advice will keep you on track and will make sure your homebuying experience is a good one.
Changing jobs
A job loss or change can impede the lending process, so if you have any changes coming up, you’ll need to talk to your lender immediately. Lenders need to have a clear insight into your ability to pay your mortgage. If you can avoid changing jobs until after the purchase of your home, it’s ideal. The other ideal situation is if you move to a similar paying or higher paying job. Otherwise, any changes in income may be a red flag that would prevent the purchase of your home. If you’re thinking about changing jobs, Benham recommends talking to your lender to ask for advice on the best way to approach job changes, including how salary changes like commission and overtime might impact your purchase, before you make any final decisions.
Adding new debt
Is there a sale on furniture that would help you stock up your new home? You’ll need to wait until you’ve closed on your home before you take advantage of it. Any new debt that you incur from the time you get pre-approved to the time you close could be a problem if it increases your debt-to-income ratio.
“I always make a joke with people that Ashley Furniture, Lowe’s, Home Depot are going to have a sale next month,” Benham said. “The last thing I want to do is have to call you the day of closing and say, ‘Ashley Furniture’s going to be delivering that all to your apartment because you’re not getting the home.’”
In other words, don’t put yourself in a position where you might miss out on your dream home because you wanted to take advantage of a sale.
Applying for new credit
You may be wondering if adding a new amount of credit might help your mortgage get approved easier. If you’ve already been pre-approved for a mortgage, the answer is no; new credit won’t help you close on a mortgage. In fact, it may hurt your credit score, which can cause issues when you head toward closing. Any credit application outside of your mortgage can lower your score, as well as reduce the age of the credit in your history, which are changes that can cause problems during closing. If you do add a new card, make sure you don’t put anything on the card until after you’ve finalized your mortgage. But remember that your best bet is to stay away from any new credit until your purchase is done.
Closing accounts
If you have concerns about having cards without debt on them, don’t worry; zero or low balances can actually help you obtain a better mortgage. Open credit lines can raise your credit score and help with your utilization ratio, which looks good to lenders. Closing an account can lower that utilization ratio, which can be a big mistake if you haven’t yet closed on your home. The smarter option is to pay off any debt you may owe and keep the credit open until after closing.
Missing payments
After applying for a mortgage, you’ll want to make sure you keep up with any debt payments you might have. Late payments can have a negative impact on your ability to buy your home.
“Say, for example, you have a late payment on a credit card or installment account and it drops your credit scores,” Benham said. “That could present a problem. Maybe you file bankruptcy. Or you’re late on your house payment. If you currently own a home and you’re qualified to purchase another home, but for some reason you miss a house payment during that period, it will drop your scores.”
Some lenders may be willing to overlook a late payment, but your credit typically needs time to bounce back after late payments. Talk to your lender if you have a mishap occur to see how it will affect your ability to finalize your mortgage.
Changing banks
Lenders want to see your bank statements before they approve a loan. If you change banks during the lending process, it can be difficult for a lender to see if you have consistent income, and the changes can create issues that can cause a mortgage to fall through. Because consistency is key from the time you get approved for a loan to the time you close, be sure to keep your bank the same until after your mortgage is finalized.
Final notes
The important thing to remember before you close on your home is to not make any major life decisions that can cause negative impacts on your credit score. Keeping your finances stable and consistent is the best way to make sure your loan goes through without a hitch. Benham recommends you always talk to your lender before making any financial decisions to determine how they may affect you before you close.
The Jim Allen Group provides access to information on this blog/website as a public service for educational purposes only. Although reasonable efforts have been made to ensure that all of the information made available is current, accurate, and complete…[read more]