Things To Avoid During Mortgage Loan Process
This BLOG On Things To Avoid During Mortgage Loan Process And Close On Time Was UPDATED On June 17th, 2019
Tips On Things To Avoid During Mortgage Loan Process:
It is human nature for a home buyer to get super excited when buying a new home.
- Many home buyers think of ideas in decorating their new home during the mortgage application loan process
- However, during the mortgage application process, a borrower needs to be walking on eggshells and not make any changes on their credit and/or financials
- When it comes to credit and finance there are things to avoid during mortgage loan process
What Things To Avoid During Mortgage Loan Process?
When a mortgage loan borrower completes their 1003 mortgage application, the mortgage loan officer pulls a credit check.
- The Loan Officer will review 2 years tax returns, W2s, paycheck stubs
- The LO will then run the credit report and mortgage application through an Automated Underwriting System
- Once the AUS yields an approve/eligible, a pre-approval is issued.
- If the mortgage borrower meets all the guidelines, the AUS will render an approve/eligible per AUS.
- Hard credit inquiries will definitely cause a drop in credit scores
- Charging large ticket items such as appliances and new furniture will affect debt to income ratios.
- Large purchase on a credit card will increase the credit debt and increase the DTI
- Credit card balances over 20% credit utilization ratio will cause a drop in credit scores
- More monthly payments will increase debt to income ratio which can potentially disqualify borrowers for a home loan
Avoid New Credit Top Thing To Avoid During Mortgage Loan Process
A mortgage loan borrower should never apply for new credit of any kind during the mortgage process
Here are things to avoid during the mortgage process.
- Never pay off a collection account or charge off account unless told to do so by the mortgage lender.
- Paying off old negative debt will reactivate that account and can cause credit scores to drop due to activation of date of last activity on negative credit trade lines
Don’t Close Credit Accounts Are Things To Avoid During Mortgage Loan Process!
Never close active credit card accounts.
- Closing out a credit card account that you do not use will definitely drop your credit scores
- Also, never max out your current credit cards
- This will also cause your credit scores to drop
- Always maintain a 25% or less of balance on all of your credit accounts
Don’t Co-Sign for Others!
Never cosign for anyone during the mortgage application process.
- Cosigning will hurt your credit scores for two reasons
- The first is the credit inquiry, the hard pull of your credit report, and second, you are taking on more debt
- Do not dispute negative information on your credit report
- This holds true even though you have proof that the negative information is not yours
- This will halt the mortgage application process
- Also, do not enroll in any credit monitoring services as well
- The less activity there is on your credit profile the better it is
- Any activities on your credit during the mortgage application process will alert the underwriter as a red flag
- This will scrutinize your mortgage application process and letters of explanations will be required which might delay your home loan closing
Be Timely On All Monthly Debts
Never be late on any monthly debt obligations.
- One late payment during the mortgage application process can potentially halt your home loan closing until there is a valid explanation