The journey to homeownership is an exciting one, filled with dreams of creating a space to call your own. However, it’s essential to tread carefully after you’ve applied for your mortgage and before you reach the closing stage. Several crucial factors can impact your loan approval and interest rates. In this blog, we’ll discuss common mistakes to avoid during this critical period to ensure a smooth home buying experience.
- Don’t Deposit Large Sums of Cash
Cash deposits can be problematic for lenders because they are difficult to trace. Before making any cash deposits into your accounts, consult your loan officer to ensure that you properly document these transactions.
- Avoid Making Large Purchases
It’s not only home-related expenses that you should be cautious about; any significant purchases can raise red flags for lenders. New debts can increase your debt-to-income ratio, making your loan riskier. This might lead to disqualification for your mortgage. Resist the urge to make substantial purchases, even for furniture or appliances, until after closing.
- Don’t Cosign Loans for Anyone
Cosigning for a loan can impact your debt-to-income ratio and make you accountable for the loan’s repayment. Even if you don’t plan to make payments, your lender will consider this commitment against you.
- Avoid Switching Bank Accounts
Consistency among your accounts makes it easier for lenders to track and verify your assets. Speak with your loan officer before transferring money between accounts to ensure that you follow the correct procedure.
- Don’t Apply for New Credit
Applying for new credit, whether it’s a credit card or an auto loan, can affect your credit score. Multiple credit inquiries across various financial channels can impact your FICO® score, potentially influencing your eligibility and interest rate.
- Don’t Close Any Accounts
Closing credit accounts can have negative consequences for your credit score. Your credit history’s length and depth, as well as your credit utilization ratio, play a significant role in your credit score. Closing accounts can adversely affect both these factors.
- Do Discuss Changes with Your Lender
Maintain open communication with your lender regarding any changes or anticipated changes in your financial situation. Whether it’s income fluctuations, asset adjustments, or credit-related matters, your lender can guide you on how these changes may impact your loan approval. If you’ve recently experienced a job or employment status change, it’s crucial to share this information with your lender to ensure that your home loan can still be approved.
Bottom Line
To ensure a smooth home purchase process, consult your lender before making any significant financial decisions, moving money between accounts, or undergoing major life changes. Your lender is the best resource to help you understand how your financial choices can affect your home loan. By following these guidelines and maintaining transparent communication with your lender, you can navigate the path to homeownership with confidence.