Buyers: Protect Your Home Loan!

What NOT to Do During the Application Process

Congratulations! You've taken the exciting step toward purchasing a home. As you move through the loan application process, it’s crucial to understand that your financial decisions can significantly impact your mortgage approval. Even seemingly small actions can raise red flags for lenders and jeopardize your loan approval.

Here’s a guide on what NOT to do while applying for a home loan and why these actions can put your dream home at risk:

1. Do NOT Buy a Car or Make Large Purchases

Lenders closely monitor your debt-to-income ratio (DTI). Purchasing a new car or making any other large purchase on credit increases your debt, which can negatively impact your DTI. This could make you appear riskier to lenders and potentially lead to loan denial or higher interest rates.

2. Do NOT Switch Jobs or Career Fields

Stable employment history is a key factor in loan approval. Switching jobs or moving to a different career field can raise concerns about your income stability. Lenders want assurance that you have consistent income to make your mortgage payments.

3. Do NOT Move Money Around or Open New Bank Accounts

Lenders will carefully examine your bank statements to verify your assets and ensure that you have enough funds for the down payment and closing costs. Moving large amounts of money or opening new accounts can create confusion and make it harder for lenders to verify your financial stability. Keep your funds where they are until after your loan closes.

4. Do NOT Make Large Cash Deposits Without Documentation

Cash deposits can be difficult to trace and verify. Lenders need to know where your funds are coming from to comply with anti-money laundering regulations. If you receive a gift or other legitimate cash infusion, be sure to provide the necessary documentation to your lender.

5. Do NOT Co-Sign for Any Other Loans

Co-signing on a loan makes you legally responsible for that debt, even if the primary borrower is making the payments. This additional liability can affect your credit profile and debt-to-income ratio, potentially jeopardizing your mortgage approval.

6. Do NOT Apply for New Credit Cards or Loans

Every time you apply for new credit, it triggers a hard inquiry on your credit report, which can temporarily lower your credit score. Additionally, new credit accounts can increase your overall debt and make you appear riskier to lenders.

7. Do NOT Miss Any Bill Payments

On-time payment history is one of the most critical factors in your credit score. Missing payments on existing debts or utilities can negatively affect your credit score and raise red flags with your lender.

Why It Matters:

Your lender’s job is to assess your financial stability and ability to repay your mortgage. Any changes in your financial profile during the loan approval process can lead to delays, increased interest rates, or even loan denial.

Pro Tips for a Smooth Loan Approval:

• Keep your finances steady and predictable.

• Maintain your current job and income stream.

• Communicate with your loan officer before making any major financial moves.

• Provide documentation for any large deposits or financial changes.

By avoiding these common pitfalls, you’ll be in a much stronger position to secure your home loan and move into your new home with confidence.

If you have questions or need guidance during the loan process, reach out. I’m here to help!