Five Don’ts of Mortgage Funding
1: Don’t change your employment status
Changing your job while applying for a mortgage can be a huge mistake. While it doesn’t necessarily automatically disqualify you from obtaining a loan, lenders see it as a large red flag.
Lenders on a loan look at a vast assortment of items to see if you qualify for a loan, among them are aspects of your income: the amount, the history, and the stability. Jumping from job to job will cause reason for concern for a lender as they may decide your income isn’t stable enough for a loan. On the other side of the coin should you be changing jobs in the same field with similar pay it won’t be that big of an issue.
2: Don’t make any major purchases (cars, furniture, home theater, etc,)
You’ll want to hold off on getting a new car until after you have secured your home loan. Lenders will be looking at your debt to income ratio to see how much they can safely loan you. Increasing you debt, even by a small amount could be the difference in getting approved for a loan. Just because you’ve been pre-approved doesn’t mean you’re safe to go on a spending spree either. Lenders will recheck your financials when you go for final approval.
3: Don’t increase you credit card debt (or miss payments)
Similarly to not getting a car loan, you’ll also want to keep your credit card debts lower as well. Your debt to income ratio includes credit card balances, the higher the debt, the less home you’ll be able to be approved for.
4: Don’t change bank accounts or make undisclosed large deposits
Lenders will be taking a close look at your most recent bank statement as part of the loan approval process, and then they’ll look again during the underwriting process. You’ll want to explain any large deposits or withdrawals to your lender. This means a having a clear paper trail and documentation for gift funds to make the lender happy.
5: Don’t apply for a credit card, co-sign a loan or make a credit inquiry
Adding new lines of credit to your credit history right before you apply for a home loan won’t be doing you any favors. Similarly co-signing on a loan for someone else is going to increase your personal debt to income ratio as you become legally liable for the debt you are cosigning for should the person who initiated the loan default on the payments. Even if the person you are co-signing for is the most trustworthy person on the planet lenders will still count the debt against you as well.
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