Mortgage Loan Process
We have covered many blogs on what to do to get a mortgage loan approval. Now since you have a mortgage approval, there are things you should not do. Remember that a mortgage lender can disqualify you at any time even if you have a written mortgage loan approval. You need to be super careful from the time you get a mortgage loan approval and the time you close on your loan.
Do not open new bank accounts during mortgage loan process
One of the things you should not do is to open new bank accounts or close the bank accounts you have. Mortgage lenders will ask you for periodic bank statements and want to see a history of bank deposits and withdrawals. Changing bank account will often lead to confusion and more explainations, thus causing a possible delay on closing on your home. All funds that will be used for the down payment needs to be seasoned and your bank statements will be scrutinized until the day you close on your mortgage loan.
Monitor your bank accounts carefully during mortgage loan process
Always cooperate with your mortgage lender’s requests for documentation, even though it might seem petty. Your mortgage might want to know an explaination why there was a $100 deposit or a $300 withdrawal from your bank. Many folks might feel like telling the mortgage lender to mind their own business and what does such little trivial things have anything to do with you getting a mortgage loan when you have plenty of documented cash in your bank account for a down payment. However, you need to realize that they do not have to give you the mortgage loan and you need to comply with whatever they ask.
Do not quit your job during mortgage loan process
If you need to get a new job, see if you can wait until you close on your house. Mortgage lenders like to see a two year history of employment. Changing jobs with the same salary will not disqualify you in getting your mortgage loan closed but it can cause a delay and more red tape. If you really need to change jobs, you can change jobs while the mortgage loan application is in process but remember that employment need to be reverified and new W2s need to be resubmitted from your new employer.
Do not co-sign for anyone during mortgage loan process
Under no circumstances co-sign for anyone. Cosigning for your child for a car loan or some other loan might disqualify you from your mortgage loan on going further because even though you are not liable for the payment, the mortgage loan lender will consider that as your debt and will count it against your debt to income ratio. Also, the creditor will be pulling credit on you which in turn will drop your credit scores.
Do not apply for new credit during mortgage loan process
Do not shop for any mortgages or any other credit. Although a mortgage loan credit check will not hurt your score, it will raise eyebrows to the mortgage lender if you continously have other mortgage companies pulling your credit. Mortgage lenders want to see mortgage credit report checks to be done within a 20 day window. Anything beyond the 20 day window will cause suspicion and might hurt your credit rating.
Do not apply for any credit cards or any other credit. If you apply for credit, each credit check will cause a drop of your credit scores. Plus, the mortgage lender will be checking your credit scores again prior to final closing and you will need explainations on why there were credit inquiries. Many mortgage loan borrowers have a tendency to apply for credit cards from furniture stores where they off 0% financing and no payments until a future date. By applying for credit from a furniture store and purchasing the furniture now will cause your debt ratios to go up, your credit scores to go down, and cause your mortgage loan to possibly get disqualified.
Do not make any large purchases during mortgage loan process
If you have a change of circumstances or will have a change of circumstances, always tell your mortgage broker. Your mortgage broker will be your best friend and closest ally while your mortgage loan is in underwriting. For example, if you need to buy a new car because your old car is not repairable, you MUST talk to your mortgage broker first before signing the auto loan. If you have a change of marital status or anything that is dramatic, you must tell your mortgage broker.
Do not pay off old credit card accounts during mortgage loan process
Do not, under any circumstances, pay off any old collection accounts unless instructed by your mortgage broker. If you pay off an old collection account or make a partial payment, your payment will trigger new activity to your derogatory credit line item and will drop your credit score.
Do not be late with any payments from the time you are preapproved to the time you close on your mortgage loan. I have seen too many cases where the mortgage loan closing got cancelled and the loan was completely rejected prior to closing because a mortgage loan borrower has innocently missed to make a credit card payment or auto loan payment. It is easy to overlook a monthly payment during a time of packing and rearranging your lives preparing for the big move to your new home but unfortunately, a late payment will guarantee a mortgage loan denial. You can bank on it!!!!
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