Crucial Steps to Take After Submitting Your Mortgage Application

When preparing to purchase a home, the anticipation of moving in and personalizing the space can be thrilling. However, before getting carried away with emotions, it's crucial to consider certain important aspects after applying for your mortgage and before the closing process. Here is a checklist of things to bear in mind when applying for your home loan.

Avoid Depositing Significant Amounts of Cash

Lenders require a clear source for your funds, and cash transactions can be challenging to trace. Before depositing any cash into your accounts, consult with your loan officer to determine the appropriate documentation method for your transactions.

Refrain from Making Significant Expenditures

It's not only purchases related to your home that might jeopardize your loan eligibility. Any substantial expenditures can raise concerns for lenders. Individuals with recent debts tend to have elevated debt-to-income ratios, making their loans riskier. This could result in disqualification for a mortgage. It's advisable to refrain from making significant purchases, including furniture or appliances, to maintain financial stability during the loan application process.

Avoid Cosigning Loans for Others

By cosigning a loan, you take on responsibility for its success and repayment. This commitment results in increased debt-to-income ratios. Even if you assure that you won't be the one making the payments, your lender will consider them as part of your financial obligations.

Avoid Changing Your Bank Accounts

Lenders must trace and monitor your assets, a task simplified when there is uniformity across your accounts. Prior to any fund transfers, it's advisable to consult with your loan officer.

Refrain from Seeking New Credit

Whether it's a fresh credit card or a new car, when various financial entities check your credit report (for mortgage, credit card, auto, etc.), it can influence your FICO? score. Lower credit scores can affect your interest rate and potentially impact your approval eligibility.

Avoid Closing Any Accounts

Some buyers mistakenly think that reducing available credit makes them appear less risky and increases their chances of approval. However, this is a misconception. Your credit score is significantly influenced by the length and depth of your credit history, not just your payment history, and the ratio of your total credit usage to available credit. Closing accounts adversely affects both aspects of your credit score.

Ensure to Communicate Changes with Your Lender

Be transparent regarding any changes that have happened or are anticipated when communicating with your lender. Fluctuations in income, assets, or credit should be carefully examined and managed to ensure the continued approval of your home loan. If there have been recent changes in your job or employment status, it's crucial to inform your lender. In essence, it's advisable to openly disclose and discuss your financial intentions with your loan officer before taking any significant actions.

Bottom Line

To ensure a smooth home purchase process, it's important to consult your lender before making significant purchases, transferring funds, or undertaking major life changes. Your lender, being qualified to explain the potential impact of your financial decisions, can provide valuable guidance in this regard.