After finding your dream home and applying for a mortgage, you may be tempted to go shopping for your new home or reward yourself with a new credit card, but be wary of making any large financial changes until after your mortgage is approved. Sometimes even something as small as depositing cash into your bank account can affect your mortgage.
So, always consult your lender about any financial decisions prior to closing on a home, and in the meantime, read up on six things to avoid when applying for a mortgage.
1. Don't Make Any Large Purchases Like a Car or Furniture
Large purchases tend to come with new monthly payments which in turn create new qualifications for a mortgage. By purchasing large items, your debt-to-income ratio rises and you may end up no longer qualifying for your mortgage.
2. Don't Deposit Any Amount of Cash into Your Bank Account Before Speaking With Your Bank or Lender
Lenders need to track where your money is coming from and cash is not easily traced. If you need to deposit cash into your account, consult with your lender about the proper way to record the transaction.
3. Don't Open or Close Any Credit Accounts
Lenders need to check your credit score in order to determine your interest rate on the home loan. If you apply for new credit, an organization has to run a credit report and will more than likely lower your score. On the other hand, if you close an account, the lender cannot evaluate how long you’ve had the account or the percentage of credit you use. Both situations can impact your eligibility to qualify for a mortgage.
4. Don't Change Bank Accounts
It is harder for lenders to track your money if you transfer it to another account. Similar to avoiding cash deposits, speak with your lender before transferring any money into a new bank account.
5. Don't Co-Sign Loans for Anyone
When you co-sign a loan, your debt-to-income ratio rises. Even if you never make a single payment on the loan, your lender will still count the payments against you which could result in you no longer qualifying for your mortgage.
6. Don't Change Jobs or Become Unemployed
Your debt-to-income ratio is a large factor in determining your mortgage. If your income changes or you lose your job, it can significantly impact your ability to acquire a home loan.
If you’re unsure about a financial decision prior to closing on your home, always consult your lender. They are qualified to explain how certain financial moves may impact your home loan.
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