Getting approved for a home loan is an exciting feat!  You’ve built a good credit profile, saved enough money for a down payment and have an accepted offer on a home.  Now, it’s important to maintain the same credit profile as you did when your home loan was approved.

Here’s a few tips to ensure a smooth mortgage process:The dos and donts of applying for a home loan

Avoid Making Big Purchases

You may be excited to buy furniture or décor for your new home but hold off on making sizable purchases until you’ve closed.  Want to purchase a new car?  Wait until after you close.  New expenses might make your underwriter rethink whether you can afford your monthly mortgage payments.  The higher your debt-to-income ratio, the bigger risk you’ll pose to your lender.

Avoid Big Changes in Your Credit

Do not make any drastic changes in your credit. Opening or closing new lines of credit can hurt your credit score. Instead of closing out credit accounts, just try paying them off. Open credit keeps your credit score high. Closing credit accounts can be dangerous because your debt takes up a higher percentage of your available credit.

Don’t Move Money Around

Lenders will look at your assets and bank statements during the underwriting process. If there’s any unusual deposits or withdrawals, you’ll need to explain them. A large, undocumented amount of cash deposited into your account will raise red flags. If you are receiving gift funds as a down payment or for closing costs, make sure to take a picture of the check before you deposit it into your account.

Stay on Top of Your Bills

Make sure to pay all your bills on time. Having just one late payment can lower your credit score as much as 110 points! That late payment could jeopardize your home loan. Also, many lenders require at least 12 consecutive months of on-time mortgage or rent payments to be considered for a home loan. If you are late on your mortgage or rent, that could put an end to your application as well.

Just Say No to Co-Signing a Home Loan

Co-signing a home loan means that you are financially responsible for someone else’s debt. Even if that person is financially responsible, lenders need to factor that monthly obligation into your debt-to-income ratio. Adding more debt to your list could stretch your debt-to-income ratio too thin.

Thank you,
Victoria O’Brien