Once you submit a mortgage application, you’ll want to avoid negatively impacting your loan approval in any way. Mortgage companies look for stability and consistency throughout the mortgage process, ensuring that you maintain your financial situation till closing. Here are some simple things to avoid and helpful tips to follow while your mortgage is on its way to closing!
Don’t apply for new credit
New credit inquiries can negatively impact your credit score. Depending on the elements in your current credit report, a credit score can drop as much as 15 points for a single credit inquiry.
- Tip: Apply for credit monitoring
Signing up for credit monitoring will help you watch and monitor your credit score. For a small fee, the credit bureaus will monitor your score monthly and inform you of any new credit activity that may impact your scores. This is especially helpful in detecting the first signs of identity theft.
Don’t make large purchases
Avoid making large purchases before your mortgage closing, such as a new couch or new car. Making large purchases may impact your liquidity, which may be used to verify your ability to pay for a down payment or closing costs. Additionally, maxing out your credit limits may negatively impact your credit score, so try to avoid having a balance that exceeds 30 percent of the total available credit.
Don’t close credit accounts
Closing a credit card will adjust your total amount of available credit, which will impact your score. Closing a card may also affect other factors of your score, such as the length of credit history. It’s okay to keep accounts open even if the associated cards have little to no activity.
Don’t have any late payments
Mortgage companies will monitor your payment history to make sure you are a responsible borrower, even during the mortgage process.
- Tip: Set up payment reminders
If you have trouble making timely monthly payments, try setting up auto-pay or payment reminders!
Don’t have any major life changes
Avoid changing jobs, changing your marital status, or even taking an extended vacation during the mortgage financing process. Significant life changes may lead to unexpected delays or additional paperwork needed.
- Tip: Keep an open line of communication with your mortgage specialist
If you plan to go through a major life change before your loan closing, consult your mortgage specialist first. Have an open line of communication to learn about whether a specific action can negatively affect your loan approval.
Don’t make any undocumented deposits
Avoid having any random, undocumented deposits into your bank account during the mortgage process. You must document all deposits properly to prove they are not borrowed funds. You may also be required to verify where the funds came from and show proof of transfer. The mortgage underwriter will most likely request a letter of explanation for any cash deposits into your account.
Contact us to learn more about steps you can take to ensure a smooth mortgage financing process.