While many borrowers are concerned with what they need to do in order to qualify for a mortgage, there are also a number of things that borrowers should not do once approved for a loan.
Dont switch banks or move money around. As your lender reviews your loan package, you will likely be asked to provide bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid assets. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. Changing banks or transferring money to another account – even if its just to consolidate funds – could make it difficult for the lender to document your funds.
Dont disregard your lenders requirements. You may have been pre-approved for the loan but your work with the lender is far from over. In order to process your loan, you need to meet certain requirements. Your lender will need copies of your bank statements, W2s and other paperwork. It is up to you to get it to him or her as soon as possible. Failure to submit certain qualifying documents could cause you to lose your loan and the financing you need to buy your home.
Dont get a new job. Lenders like to see a consistent job history. Generally, changing jobs will not affect your ability to qualify for a mortgage loan – especially if you are going to be making more money. But for some people, getting a new job during the loan approval process could raise some concern and affect your application.
You can may be able to change jobs as long as it can be verified and the new job is in the same line of work as you had before.
Do not co-sign on a loan for anyone else. Although you will not be making the payment, the lender still views this as your debt.
Remember that once you apply for a mortgage, you are involved in an ongoing process, and anything that happens between your first application and the day of closing can be considered by the lender.
After applying for a mortgage make sure that you do not continue shopping around with other companies. When initially looking for a lender do your shopping and comparing of rates, payments, and closing costs and once you decide on a mortgage professional stick with them(unless you are completely unsatisfied with their service for some reason). This is very important to follow because all credit pulls when shopping for a mortgage will not hurt your credit as long as they are done within a 14 day period. If you continue to allow other mortgage companies to look at your credit and/or apply with other companies this can negatively affect your credit scores. There have been situations where borrowers have continued to apply for financing for mortgages and/or other credit and it has hurt their credit enough to disqualify them for the mortgage altogether, or enough to force them to accept a much higher interest rate. If you have questions about what to do or not to do, please contact your mortgage professional first. Don’t let this happen to you. Be honest and upfront with your mortgage professional and keep in touch after application all the way through closing to guarantee a smooth hassle free transaction.
PS: Especially don’t be tempted by the buy now, no payments for 12 months deals at the furniture stores. Even though you don’t have to make a payment, this will still affect your credit negatively and it will also still affect your debt ratio.
After applying for a mortgage do not enter into consumer credit counseling. Do not file for BK and do not stop paying on your mortgage. It would suprise you how many loans are declined due to homeowners doing these things.
In addition it’s a good idea to give yourself a couple of extra days if possible to schedule movers, landscaping companies or and other repairs for the new house. This will give you extra time to get the closing completed and the transaction funded. If you schedule movers or other companies the same day as closing or even the day after you might be in for a stressful situation if for any reason the closing is delayed.
Always consult with your mortgage professional when there is a question regarding any of this because it can cost you your home loan.
After applying for a mortgage do not let anyone pull your credit or apply for any new credit at all. Try to keep everything the same as far as credit goes as when you where initially pre-approved unless told different by your loan officer.
Do not ignore to tell your mortgage broker about any material changes in the purchase agreement you and the seller come to agree upon after the mortgage process has begun. A slightly lower sale price can alter the loan-to-value ratio and requires re-submission of loan documents. Your mortgage broker and lender have to be made aware if any addemdum is later attached to the purchase contract.
After applying for a mortgage be sure to advise your loan officer to any changes in your marital status or name changes. This will help you avoid problems with the final closing documents and/or title problems.
Be certain not to lease a car or allow a car dealer to “pre-qualify” you for a car lease or loan. It doesn’t matter whether or not the car is new or used, because either way this would fall under the category of taking on new debt, and is a very common reason for individuals, particularly those making purchases for the first time, run into complications with their mortgage application process after the fact. If you have any need to make any further applications for substantial credit, please give us a call.
Do not take on new debt. The temptation is strong. There are so many big purchases that people want to make in connection with a move: appliances, window treatments, furniture, etc. When you add to this the fact that, today, everyone offers easy terms and no money down-well, why not just do it? Answer: because you will change what the mortgage industry calls your “debt-to-income ratios” (the relationship of your income to your debt).
Do not change jobs. If at all possible, try not to make a career move during the time between your mortgage application and the closing on the home you are purchasing. But, you ask, “What if it’s a BETTER job, for MORE money, in a DIFFERENT field?” Still, try and wait until AFTER closing. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and may delay your closing.
Do not pack too soon. Well, go ahead and pack your clothes and dishes. But do not pack your bank statements, tax returns, or other important paperwork. Most especially, do not pack your checkbook! More than one buyer has had closing delayed while a friend or relative hurried over with additional funds because the checkbook was in the moving van.
Do not lease a new car. This should go under the general heading of “no new debt.” It is highlighted here because, for some strange reason, many buyers do run right out and lease a new car during the time between mortgage application and closing! As with any debt, this will change your “debt-to-income ratios” and may cause you not to qualify for your mortgage.
Do not stop making your regular monthly payments after applying for a mortgage. Borrowers refinancing their home to payoff other debts sometimes stop making their regular monthly payments because they are going to payoff the debt. This can cause problems during the loan process because not making payments on time may hurt your credit rating. Lower credit scores may cause your interest rate to go up or result in you being denied credit.
Once you apply for a mortgage to refinance or for a home purchase your job is not done. Be involved, don’t just wait for the call to schedule the closing. Check with your mortgage broker, find out what is going on with your loan, talk to your realtor make sure everything you want done is getting done. Be proactive not reactive, don’t wait for a problem then rush to solve it, work to prevent any issues form happening in the first place.
Do not pay off any old collection accounts on your credit report unless you were specifically told to do so by your mortgage professional.
Paying off old colection debt will often signal to the credit reporting agencies that there is new activity on an negative entry and actually lower your credit score.