What Not to Do During the Mortgage Process

October 29, 2021 | 3 min read | The mortgage process

Upon submitting a mortgage application and providing some brief documentation, you will receive a mortgage pre-approval. Pre-approvals are based on your current financial and credit information, so it is important to avoid things that may negatively affect your loan approval throughout the mortgage process. 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! 

1.) 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. The credit bureaus will monitor your score monthly and inform you of any new credit activity that may impact your scores for a small fee. This is especially helpful in detecting the first signs of identity theft. 

2.) Don’t make large purchases

Avoid making large purchases before your mortgage closing, such as new furniture or art. 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. 

3.) 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. 

4.) Don’t have any late payments

Mortgage companies will monitor your payment history to ensure 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! 

5.) 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
    Consult your mortgage specialist first if you plan to go through a major life change before your loan closing. Have an open line of communication to learn about whether a specific action can negatively affect your loan approval.  

6.) 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. 

7.) Don’t change financial institutions

As mentioned above, mortgage companies look for financial consistency when approving you for a mortgage. If you move your money to a new financial institution during the mortgage process, you may be required to provide additional documentation and a letter of explanation.

Contact us to learn more about steps you can take to ensure a smooth mortgage financing process.