The mortgage process usually takes 30-60 days to complete, depending on your situation. If during that time, you change anything about your financial situation or work life, it could affect your approval or delay your loan closing.
Fortunately, a lot of these variables are within your control. Here’s what you shouldn’t do when you’re in the middle of a mortgage application.
Don’t Apply for New Credit
Lenders pull your credit when you apply for a loan, but they’ll check it again before you close. If your credit score falls or you have more credit lines than before, it could affect your approval. A new credit line can make your score fall, and it can also increase your debt-to-income ratio (DTI). If you’re credit score or DTI are already close to the limit, you could lose your approval.
Don’t Miss Loan or Credit Card Payments
Your credit score is made up of five parts, but the largest is your payment history. Try not to miss any payments as it could affect your credit score. Not only could your score drop, but the presence of a late payment might make lenders change their minds about your loan approval.
Don’t Make Large Deposits
Any large deposits outside of your salary could hurt your approval. Lenders will ask for proof of where the funds came from to ensure you didn’t take out a loan. If you come into money from the sale of an asset or a work bonus, tell your loan officer right away. We’ll walk you through the process of how to handle the situation so underwriters don’t consider it a red flag.
Don’t Make Large Purchases
Buying a home means you’ll need furniture, appliances, and other expensive items, but you should wait to buy them until after you close on the loan. If you use your savings to pay for the items, you may not have enough for the down payment, closing costs, or required reserves to qualify for the loan. If you charge the items, you could hurt your credit score and increase your DTI ratio. A lower credit score can knock you out of the loan program you were approved for, and a higher DTI ratio can make it harder for you to afford your loan.
Don’t Transfer Funds Between Accounts
Even if you get a great opportunity to open a new investment account or your bank offers a great promotion for a new savings account, talk to your loan officer first. You may be able to transfer the funds without issue, but you’ll need a paper trail.
Don’t Cosign Any Loans
Even if your kids are in desperate need of a cosigner on a car loan or credit card, wait until after you close on your mortgage. Cosigners are liable for the debt they put their name on and the debt gets included in the DTI ratio when you apply for a mortgage. A higher DTI could affect your loan approval or increase the rates you get because a new loan makes you a riskier borrower.
Don’t Change Jobs
If you can help it, don’t change jobs (similarly, if you lose your job, tell your loan officer as soon as possible.). Underwriters like stable employment history and a sudden change can be risky for lenders.
If you’re thinking of leaving your employer for a better or different job, talk to your loan officer. Sometimes it’s best to wait, especially if your loan is closing in the next couple of weeks. If it can’t wait, you may have to delay your closing slightly so you can prove the new income and that you have the qualifications to make it last.
Don’t Buy a New Car
Even if you need a new car in the middle of the mortgage process, try to wait. If possible, rent a car or borrow from a family member. If you absolutely can’t wait, talk to your loan officer about your DTI ratio. Taking on a car payment will increase your DTI and could hurt your approval. But, if you have a low DTI already, it may not be as detrimental.
If you plan to pay cash, check with your loan officer first. If the money comes from an account the underwriter verified for your down payment or closing costs, it may affect your approval.
Don’t Ignore Requests
Our loan officers are great about staying in touch throughout the mortgage process, but you play a key role, too. Communicating with us, answering questions and/or providing necessary documentation will move the process along the fastest. The longer you wait to provide essential information, the longer it may take to close your loan. These requests make sure you can afford the loan and meet the requirements before we close on it.
Don’t Pay Old Collections
It sounds like the opposite of what feels right, but paying an old collection during the mortgage process can actually hurt your credit score. When you refresh a collection account, it becomes active again on your credit report. The new activity could make the collection hurt your credit score again. Even if the collection was on your report before, if it was older, it likely didn’t hurt your score much. Paying it down or even talking to the collection agency about it can make it a “fresh” collection that may drag your score down and could hurt your loan approval.
When you’re in the middle of the mortgage process, it’s more important than ever to not switch jobs or your spending habits. Once the lender pulls your credit and verifies your assets, employment, and debts, nothing should change unless they make recommendations.
Our loan officers are approachable, helpful, and give great advice. It’s our goal to get you to the closing table as fast and stress-free as possible!