Applying for a Mortage? Avoid these common mistakes

You just signed a contract to buy a home and are excited for this new home. Now it's time to get approved for a mortgage so you can purchase that home. Unfortunately, it’s surprisingly easy to mess up your mortgage by making changes to your financial situation.

Here are some things to avoid when getting a loan to buy a home. 

Apply for new credit

Changes in your credit and credit score can impact the interest rate you get, cause delays in completing your loan process, and sometimes, mean you cannot get a loan at all. If you must open a new account, or even borrow against retirement funds, talk to your mortgage broker before you do anything. 

Close credit accounts 

Closing credit card accounts lowers your “total credit available” number and can negatively impact your credit score. It’s counter-intuitive, but you should not do this. 

Change jobs

Many lenders require steady income for a period of time and/or proof of income at the new job. As well, going from salary to “commission” can negatively impact your ability to qualify for a loan as self-employed people and those working on commission have stricter requirements for verifying income. 

Over Spend

Maxing out existing credit cards will impact your income to debt ratio and can cause you to not qualify for a loan. As well, spending money set aside for down payment  will impact your ability to buy a house. Curb your spending until you close on your new home.

Change Bank Accounts

Lenders review deposits and payments so changing banks creates extra work for you and the lender. As well, some banks have minimum periods of time an account has to be open before you can wire funds out (often required to close on the home) so talk to your loan officer before moving any money to new accounts. 

Buy anything with payments

If you buy a boat, car, or furniture that requires payments, you are impacting your debt load and may not qualify for a loan. This is true even if it is “interest free” and there are no payments for a year or more. Those “payments” count in your debt ratios immediately so skip the large purchases.  

Make Large Deposits

Depositing large sums into your accounts requires documentation. Gifts from family to help with down payment will require paperwork proving that is not a loan. Generally lenders want to see that you have had the money to close for at least 2 months. Keep deposits small, and document all deposits, especially cash. 

Co-sign on a loan or lease

For mortgage purposes, that debt payment or lease payment is your debt. Don’t help anyone this way while getting a home.  

If you have questions about applying for a mortgage loan, the purchase process or buying a home, the 919 Realty Group is ready to help you today.