Once you’ve applied for a mortgage to buy a home, there are some key things to keep in mind. While it’s exciting to start thinking about moving in and decorating, be careful when making big purchases. Here are a few things you may not realize you need to avoid after applying for your home loan.
1. Don’t Deposit Large Sums of Cash
Lenders need to source your money, and cash isn’t easily traceable. Before you deposit any cash into your accounts, discuss the proper way to document your transactions with your loan officer.
2. Don’t Make Any Large Purchases
It’s not just home-related purchases that could disqualify you from your loan. Any large purchases can be red flags for lenders. People with new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgages. Resist the temptation to make any large purchases, even for furniture or appliances.
3. Don’t Co-Sign Loans for Anyone
When you co-sign for a loan, you’re accountable for that loan’s success and repayment. With that obligation comes higher debt-to-income ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.
4. Don’t Switch Bank Accounts
Lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.
5. Don’t Apply for New Credit
Whether it’s a new credit card or a new car, it doesn’t matter. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), it will impact your FICO® score. Lower credit scores can determine your mortgage interest rate and possibly even your eligibility for approval.
6. Don’t Close Any Accounts
Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. A significant component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts negatively impacts both aspects of your score.
You want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make any significant life changes, be sure to consult your lender to ensure your home loan can still be approved.