What NOT to Do When Applying for a Mortgage
We focus so much on things “to do” when applying for a loan, such as saving, eliminating debts, etc. It’s also helpful to touch on what not to do. You wouldn’t want to be pre-approved, find the home of your dreams, and then do something to jeopardize the loan.
Below are some “no-no’s” and things to avoid when buying your home:
- Do not take out any new debt. This is the most common folly we see, especially around Christmas with all the deals being offered by opening store credit cards. Or there might be a big purchase that you might want to make in connection with a new home: appliances, window treatments, furniture, etc. When you add to this the fact that you can purchase with very little money down – well, why not just do it? It’s because you will change what we call your debt-to-income ratio (the relationship of your income to your debt).
- Do not change jobs. If at all possible, do not make a career move. We are basing your ability to repay the loan on what we can prove your income is, and stability in employment can help as well. At the very least, changing jobs initiates the need for more paperwork, documenting the new income and may very well delay your closing.
- Do not spend your savings. Your pre-approval is partially based on your assets. If your assets are lowered, that could impact the approval. If it doesn’t affect your down payment, it could affect the “reserves”, or money left over, which helps strengthen the overall loan scenario.
- Do not pack too soon. Go ahead and pack your clothes and dishes. But do not pack your bank statements, tax returns, or other important paperwork. It’s best to have all your financial information available, just in case.
Basically, you do not want to do anything out of the ordinary, even if you think it will benefit you. If you are thinking of doing something, check with your Home Loan Consultant first. Even if it doesn’t negatively impact you, it still might be something we need to document for your loan. We’d rather know ahead of time so we can account for it rather than finding out at the end and having it cause a delay.
These suggestions are merely that – suggestions. I’m not saying that bad things will necessarily happen if you do any of the above. They are only suggestions; words of caution. Many buyers seem to view the mortgage application process as being static, a snapshot of their financial lives at a given moment in time. It’s not. It’s definitely an ongoing process that takes into account everything you do right up until the day of closing. Heed these suggestions to avoid any potential pit falls along the way.