April 5, 2021
Learn about what to avoid while your mortgage application is processing. From big purchases to large deposits, many things can impact your mortgage. Read more to find out.
The days between the time you apply for a mortgage and the moment that you close the loan can be filled with adrenaline. The excitement of owning your first home or buying a new one can understandably create a desire to make big purchases for the new house or even make other life changes towards one big new start.
Those can surely be good things when done at the right time. However, to ensure that you don’t jeopardize or delay mortgage approval there are a few things to avoid. Some of the most obvious include not running away with the circus or booking a trip to Mars. However, to head off creating any unnecessary issues with your approval, here are some more common moves to avoid making between application and closing.
Understandably, having a new sectional sofa or fully stocked home gym ready for your new house is a tantalizing thought. However, the smart money is on remaining content for now with your existing sofa or those old dumbbells. The trouble is charging big purchases will increase your debt-to-income ratio and credit-in-use at exactly the wrong time. Similarly, avoid applying for new credit and don’t miss any credit card or loan payments as those will also be considered major negatives. Your credit score is likely to be checked again during the time between application and closing and taking your credit utilization north of 30% or lowering your credit score by not making payments on time could jeopardize your final loan approval. Therefore, wait until you close on your mortgage before creating that mini pool hall that you always dreamed of having in your basement.
There are going to be circumstances where this is seemingly unavoidable. This would be especially true if you are offered a dramatic increase in pay at a new position. However, the rule of thumb between application and closing is to stick with your current job. If you should get a better job offer discuss your mortgage loan situation with the new employer as well as your loan officer or loan underwriter. Having a whole slate of great new things like a new house and a new job occur at the same time would seem like an amazing new start. However, if possible, sit tight at your current position and once you have approval you can feel good about making the next big step in your career. This will help make your road to closing less bumpy.
Doing this could be construed by a loan underwriter as indicative of newly borrowed money and once again give the appearance of a higher debt-to-income ratio. If you are gifted money keep a well-documented and traceable paper trail. A large deposit is generally considered to be anything over $1,000. Exceptions include making transfers between your existing bank accounts or deposits from a payroll. The recurring theme here is that any big changes to your debt, personal income or credit score could very well not only alter the terms of your loan offer, but it may also sink the whole deal entirely.
These “things not to do” would apply between prequalification and closing as well. If you’re preapproved, you will receive a preapproval letter which is good for 90 days. Although it’s an offer to lend you a specific amount, it is not a commitment. So, remember to act prudently between application and closing because after all, Mars is still going to be there.