What NOT to Do When Applying For (or preparing to apply for) a Mortgage
Guest Contributor, Kathy Trotta, Mortgage Banker, Wyndham Capital Mortgage
The loan process is not over until the loan closes. Until then, income, liabilities and assets will continue to be scrutinized to make sure they fit in with any guidelines established for the particular loan. All borrowers are different, and none of this is written in stone, but in general it is best to avoid these common mistakes:
- Do not take on new debt. Most lenders will check your credit report just before funding the loan, usually a few days to the day before closing, to verify that you have not added any new monthly payments to your overall debt picture. Car payments, increased credit card balances, etc. can increase your debt ratio beyond the limits allowed by the lender.
- Do not spend any of your cash reserves, even to pay down debt, without talking to your loan officer first. A lot of loan programs require the borrowers to have a certain amount of money in reserves when the loan closes.
- Do not change jobs. While this can be unavoidable, if at all possible, wait to give your notice until escrow closes. Lenders always verify employment within a day or so of funding the loan and will almost always cancel the deal if your employment has changed. Switching from one employer to another with the same job description may not guarantee a problem, but stability is the key here. Do not switch jobs if the new one is in a completely different field, and do not, under any circumstances, decide to become self employed. If you do, your income will not be useful for another two years, so stay put if at all possible.
- Do not co-sign for anything. If your name is attached to that debt, it will be treated as yours and factored into your debt ratio.
- Do not lease a new car. This should fall under the “no new debt” category, but for some people get confused about this and think leasing is not the same as buying. The bottom line is it’s still an expense that comes out of your income, so it can still push you over the limit with your debt ratio.
- Avoid credit inquiries if you can. Though not as damaging in the past as far as your credit score is concerned, a lot of recent inquiries will not look good to an underwriter that. In most cases a few inquiries aren’t that big of a deal, but it’s best to avoid any if you can.
- Avoid making large deposits that cannot be documented. This mainly applies to accounts where money to make the down payment or close the loan will come from. If the source of funds cannot be verified, such as “mattress money”, avoid depositing it into an account that the lender is aware of. If the amount is significant enough, they will usually want to know where it came from, primarily to make sure it’s not another loan with another monthly payment. Most deposits need to be documented, and unverifiable funds can create an enormous problem. This issue should definitely be addressed beforehand.
Call me early in the process, even before you call Chrystal, and I’ll evaluate your needs. If your time frame is 30 days or 6 months out, I am dedicated to helping you fulfill your dream of becoming a home owner. Let’s get started now! Call me at 704.577.5309 today. It’s still possible to qualify for the tax rebate, and prices and values have never been better.
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Kathy is Mortgage Banker at CertusBank and is experienced, knowledgeable and dedicated to helping you meet your mortgage needs. She is available now, ready to give you her full attention.
You can pre-qualify or consult Kathy by phone 704.816.7383, or by email: KathyTrotta@CertusBank.com CALL Now to Learn Your Score and for a No Obligation Payment Quote on a sales price.