Don’t Derail Your Mortgage Application
Unless you have bought a house it is hard to anticipate everything that goes into the home buying process. For even the most seasoned of home buyers, the process can sometimes be overwhelming. For first-time home buyers, it can be downright confusing. Many first-time home buyers assume that once you get pre-qualified for a mortgage that it is all smooth sailing from there. However, the truth is that there is a lot that can happen between pre-qualification and the closing table that can jeopardize your mortgage. The time between pre-qualification and closing is crucial because lenders are still underwriting the home loan. If any of the factors that impact underwriting change, it is possible for your home loan to unravel. If you don’t want your mortgage to come apart after pre-qualifiation, there are several things you should avoid.
Mortgage Mistakes You Should Avoid
Getting pre-qualified for a mortgage or pre-approved for a mortgage is very different from closing on your house. Even if you have been pre-qualified or pre-approved, your loan is still in the underwriting process. This is an important period of time for home buyers. If you make one false move or take one misstep, you can derail your entire mortgage application. Here are the key things you should avoid before you have closed on your new house:
Don’t Make Large Cash Deposits
All income needs to be able to be tracked and must come from legal means. A large deposit of cash will cause red flags because it might cause underwriters to think you have undisclosed income sources. Typically, anything over $1,000 will catch the eye of your mortgage underwriter. If you must deposit large sums of money into your account, speak to your lender and mortgage broker first. They will have a specific process of what needs to happen in order to provide proper documentation. Speak with them and follow their directions.
Don’t Make Large Purchases
Avoid making large purchases, such as cars, boats, or anything else until you have officially closed on your new house. Large purchases made on credit can impact your credit score. It can change your credit utilization, which can significantly impact your credit score. Making large purchases with cash is also problematic. Large cash purchases can decrease how much you have in your savings account, which also can negatively impact your underwriting. If there is a large purchase you want to make, it is always best to wait until you have closed on your new house.
Do Not Switch Jobs
Your job history is important to your home loan underwriter. They want to make sure that you have a stable source of income, which speaks to your ability to make your mortgage payments on time. If you have been contemplating making a big career change, wait until after your mortgage is closed.
Do Not Add or Remove Credit
Do not add any new lines of credit. At the same time, do not remove any previous lines of credit. Adding new lines of credit can negatively impact your FICO score. On the other hand, getting rid of lines of credit can also impact your FICO score. Removing old lines of credit can reduce your credit age and it can increase your credit utilization. The only thing you should do between the time you are pre-qualified to the time you close is pay down credit card debt. Paying down credit card debt could boost your credit score, which might help you get a better mortgage rate.
Final Thoughts
Mortgage underwriters are looking for data points that will indicate your likelihood of paying back your home loan. They want to see stability. They want to see consistent income. They do not want to see lots of debt. Anything you can do to reduce your debt without causing your income or savings to fluctuate will put you in the best position possible to close on your new house. Remember, you have already been pre-qualified for a mortgage. At this point, you do not want to make any big changes to your financial picture, instead it is best to try and keep your financial picture the same.
If you have been considering any changes that would impact your assets, debts, or income, speak to your mortgage broker first. They will be able to tell you what impact that would have on your approval and guide you on the best way to document any actions you take. Remember, pre-qualification is not the same thing as closing on your home loan. Do not do anything that would jeopardize you crossing the finish line and becoming a homeowner.
