Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate and personalize your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. Even the smallest changes can sometimes have great impacts on applying for a mortgage and get you unqualified or ruin your chances. If you talk to your loan officer, they will be able to tell you how your decision will impact your home loan.
If you’re wondering what things you need to consult your loan officer about, we’ve been there before, and we’re here to give you the advice you need. Below is a list of 7 things you shouldn’t do after applying for a mortgage! Some of these may seem obvious, but some may not!
1. Don’t change jobs or the way you are paid at your job!
Buying a home is a big change. It’s normal to feel stressed about mortgage and try and get another job or change your pay– but this isn’t a good idea for many different reasons. First of all, your loan officer must be able to track the source and amount of your annual income. Changing up your income will make this more difficult, and depending on how you change things, even impossible. If you can, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.
It’s also a good idea not to bring in so many changes at once, so that you can focus on everything that needs to be done when it comes to your new home. The chores for getting a new home don’t just stop at decorating and moving in. There are many other things that need to be taken care of, to the point where some people even take days off from work to sort it all out. Changing jobs would make this harder not only for your loan officer when it comes to mortgage, but also for you and whoever you are moving with.
2. Don’t deposit cash into your bank accounts.
Lenders need to source your money and cash is not really traceable. Generally, it is advised to avoid depositing cash altogether if you can. But cash can be a big and important part of our lives, and there are still plenty of people who use it as their primary way to save and spend. If you’re used to the lifestyle of taking out and depositing cash for things such as budgeting reasons, this can be difficult to deal with.
The good news is, this doesn’t necessarily mean that depositing cash is impossible. As long as you remember to speak with your loan officer before hand, you should be able to come to a solution. So, before you deposit any amount of cash into your accounts, never forget to discuss the proper way to document your transactions with your loan officer. This will assure that everything continues to run smoothly and nothing looks suspicious or hurts you in the long run.
3. Don’t make any large purchases like a new car or new furniture for your new home.
When you buy a new big item, new debt comes with it, including new monthly obligations. This alone can further complicate things for you and your loan officer, but it doesn’t stop there. Once you make that first large purchase, everything snowballs downhill. Once you have new obligations, those then create new qualifications. As you may know, people with new debt have higher debt to income ratios. Then, higher ratios make for riskier loans… and sometimes qualified borrowers no longer qualify.
Remaining qualified is something that slips a lot of people’s mind in the process of applying for a mortgage. Many people think that if you are able to apply at first, you’ll continue to be qualified throughout the process. This can change when you make big decisions, even if they might seem necessary nor not feel very big at all to you. Keep in mind not to make any new large purchases, and if you do, consult with your loan officer first and see if a solution can be made.
4. Don’t co-sign other loans for anyone.
As soon as you co-sign, you are obligated. As mentioned earlier, new obligations always snowball into more problems that can easily eventually lead to no longer qualifying. Once you co-sign, with that obligation comes higher ratios as well, making things difficult for everyone involved. There is very rarely an option where you can co-sign a loan and simultaneously have no difficulty with applying for a mortgage.
It’s understandable that co-signing can be a personal process at times. Many times, co-signing a loan is a favor for a friend or family member. In many cases, others will try to guarantee you will be debt-free or say you can’t make the payments. Unfortunately, this doesn’t make a difference in the case of your applying for a mortgage. Even if you swear you will not be the one making the payments, your lender will still have to count the payment against you.
5. Don’t change bank accounts.
Remember, lenders need to source and track assets. Big changes generally makes all of this difficult, such as with things like changing jobs that we mentioned before. However, it’s all about the money, and bank accounts are exactly where that money is held. If there’s one thing that you’re willing not to change throughout this process (and of course, you speak to your loan officer to find solutions for everything else) it should be your bank accounts! Tracking sources is absolutely necessary to this process. That task is significantly easier when there is consistency among your accounts.
Simply not changing bank accounts sounds simple enough to most people. However, this trickles all the way down to the process of moving money around between accounts, even when they are all owned by you. You shouldn’t change bank accounts, but you also shouldn’t make very many changes to your bank accounts. Remember, this process runs smoothly with as little changes as possible. Before you even transfer money between accounts, make sure to talk to your loan officer.
6. Don’t apply for new credit.
When we say don’t apply for new credit, we mean any and all credit you can think of. 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 (mortgage, credit card, auto, etc.), your FICO score will be affected. Having a low credit score is generally not a good thing, but especially when it comes to applying for mortgage. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
7. Don’t close any credit accounts.
Once people hear that they shouldn’t apply for new credit, some think of making the move to close their accounts. Many clients have erroneously believed that having less available credit makes them less risky and more likely to be approved. This is wrong. This is not the way that credit scores work. 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 those determinants of your score. Potential lenders will still take into account any cancelled cards and what was on it at the time you cancelled. Cancelling credit accounts is a process that is much more difficult than just taking the scissors and snipping your card in half.
If you have a line of credit open with no balance, it’s definitely a good idea not to cancel that, as this always helps your credit score and can also help you in any future emergencies. Making the time to research into things that can help out your credit score or keep it from dropping low is a good idea when applying for a mortgage.
Remember that any type of change should be discussed with your loan officer. While the things mentioned above typically hurt you in the process of applying for a mortgage, loan officers have dealt with many of these before and can always find a solution. In this case, it is better to ask for permission than forgiveness, as applying for a mortgage is a big balancing act between all your finances, and even your lifestyle.
Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice anyone can give you is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.
If you’re thinking about mortgage ahead of time because you still haven’t bought that perfect home yet, you’re doing great! It’s good to know about the changes you shouldn’t make during this process so that if you really need to do something such as changing from commission to salary, you can do it before you make the big move.
However, don’t be afraid to make that move because of this article and others like these. It’s common for many people to read about the process of applying for a mortgage and become a little discouraged from achieving their dream and buying that new home they’ve always wanted. Here at Weichert Realtors, Team Realty, we understand this fear, and we’re here to tell you it doesn’t have to hold you back!
Team Realty specializes in selling country homes in North Texas– near the Dallas/Forth Worth area. Our agents are experienced and work hard to ensure that you’re getting your dream home at a very affordable price. Even if you’re not completely sure yet, give us a call or check out our contact page, and we can help you start searching and give you some advice.