A borrower does everything they are supposed to do when purchasing a home. They talk with a lender first to get pre-qualified and they may go has far has getting pre-approved. But, what happens to some of them after they are approved for a mortgage is very odd. They apply for more credit or they charge up previous accounts.
Here are the 10 commandments when applying for real estate mortgage.
Do not change jobs, become self-employed or quit your job. If you are serious about buying a home and for some reason you feel like you need to change jobs, DON’T. Even if you hate it, can’t get along with your boss, just hang in there until you close on your home.
Do not buy a car, truck or van (or you may be living in it). Doing this, will add an inquiry on your credit, which will bring your credit score down and this will also have an effect with your dept to income ratio. If your car is on its last leg, nurse it along, the payoff will be worth it.
Do not use your credit cards, store cards excessively or let your accounts fall behind. You can still use your cards; just keep them at around the 30% of your total credit line. If you are carrying a balance and the balance is around this 30% range, don’t pay them off. Having a small balance on your cards will actually help your credit score, unless your mortgage lender tells you other wise.
Do not spend your money that you have set aside for your closing. You hate to have the deal fall apart because you spent part of your down payment and/or closing cost money. Leave this money alone, just but it out of your mind. Use it for what you saved it for and that is to purchase a home.
Do not co-sign on a loan. Again this will cause an inquiry on your credit which may cause your points to drop, but the biggest impact will be your dept to income ratio. Just because you are only a co-signer this will still impact your dept.
Do not change bank accounts. Although this may not be a deal breaker, but it will cause delays with the loan and bring up red flags that will have to be explained to the lender on why the change.
Do not make large deposits without first checking with your loan officer. An unusual, large amount of money showing up in your bank account again will bring up delays and red lights. If you are coming across a sum of money, just inform your mortgage person about this and ask how they want you to proceed. Keep a paper trail on any new sum of money that comes into your contact, so you can show the lender where the funds came from.
Do not leave out depts. or liabilities from your loan application. If you have a private loan between you and someone that does not appear on your credit report, it is best to disclose this. Its not only can be considered loan fraud for not disclosing this on your loan application, but it actually may affect your ability to afford your house payment that you did not take into consideration.
Do not originate any inquires into your credit. As mentioned before, this can cause your credit points to drop and increase your dept to income. Have discipline, you will be glad you did.
Do not buy furniture. Sounds funny I know, but what happens is you find the perfect home, the offer gets accepted and a week before closing you think, it would be nice to have some new furniture to put into your new home. So you go down to your local furniture store open up a new account or put the furniture on your previous charge account. What happens is the lender, few days before closing, will pull your credit one more time to make sure you have been behaving yourself, only to find out what you have done. Now your credit dropped and your dept to income ratio is off. Remember, discipline.
If you follow these 10 commandments, you will experience a smoother mortgage process and a better closing.
Todd Rodocker specializes with first time home buyers, seasoned buyers and investors. He can be contacted at firstname.lastname@example.org, cell 801-694-0903 or by visiting his web sites www.UtahRealEstateStore.com, www.SearchUtahFineHomes.com