As you prepare to embark on the exciting journey of buying a new home, the anticipation of moving in and personalizing your space can be overwhelming. However, before you get too carried away with these emotions, there are crucial considerations to bear in mind after applying for your mortgage and before the closing process. Here is a list of important reminders for when you apply for your home loan.
- Avoid Depositing Large Sums of Cash: Lenders require a clear trail of your finances, and cash transactions can be challenging to trace. Before depositing any significant sums of cash into your accounts, it’s essential to discuss the proper documentation procedures with your loan officer.
- Refrain from Making Large Purchases: It’s not just home-related expenses that could impact your loan eligibility. Any substantial purchases may raise red flags for lenders. Individuals with new debts often have higher debt-to-income ratios, making loans riskier. Resist the temptation to make large purchases, including furniture or appliances.
- Do Not Cosign Loans for Others: Cosigning for a loan makes you responsible for its success and repayment. This responsibility increases your debt-to-income ratios. Even if you don’t intend to make the payments, lenders will factor them into your qualifications.
- Avoid Switching Bank Accounts: Consistency among your accounts simplifies the task of sourcing and tracking your assets for lenders. Before transferring any funds, it’s advisable to consult with your loan officer.
- Refrain from Applying for New Credit: Whether it’s a credit card or a car loan, new credit applications affect your FICO® score. Lower credit scores can impact your interest rate and loan approval. It’s wise to avoid applying for new credit during the mortgage process.
- Do Not Close Any Accounts: Some buyers mistakenly believe that reducing available credit makes them less risky. However, the length and depth of your credit history, along with your credit usage percentage, significantly impact your score. Closing accounts negatively affects both aspects.
- Discuss Changes with Your Lender: Open communication with your lender is crucial. Inform them of any changes or expected changes in your income, assets, or credit. Changes in job or employment status should also be disclosed. It’s best to fully discuss and disclose your financial intentions with your loan officer before making any significant financial decisions.
In Conclusion: For a smooth home purchase experience, it’s essential to consult with your lender before making large purchases, moving funds, or undergoing major life changes. Your lender, as a qualified professional, can guide you on how these financial decisions might impact your home loan approval process.