You’ve applied for a a mortgage – congratulations! You are one step closer to closing on the purchase of your new home.
What happens next will be that your mortgage lender will take a look at your entire financial picture to make a decision whether to approve your application. They will take into account your credit, income, debt and assets and more. Any changes to your financial situation between your original application and your ultimate approval and closing date can jeopardize your loan process.
To avoid any last-minute surprises with your loan approval, you’ll want to play it safe. Here are a few practices to steer clear from after you complete your application:
1: Don’t take out any new credit, no matter what
It can be tempting to plan for the major purchases to furnish your new home – new appliances, new living room furniture, a big TV. And it can be even more tempting to finance those large-scale purchases, or to put them on a credit card.
However, any credit extended to you will be factored into your debit-to-income ratio that lenders consider. They’ll also factor in those new required monthly payments into your ability to repay your new mortgage. Either way, any new credit or loans could jeopardize your approval.
Steer clear of:
Applying for any new credit cards, even if you don’t plan to use them.
Applying for store credit or in-store financing.
Applying for any loans, car loans, etc.
Co-signing a loan application for anyone.
2: Put off the big purchases – even if you’ve got the cash
Even if you have the cash on hand, and don’t need to take out new credit, hold off on that new large purchase. That cash was among the many factors that your lender looks at when issuing your approval. If you spend it – resulting in lower deposit balances – this could affect your approval. Your credit card balances were also factored into your loan approval, so you’ll want to avoid making any large purchases on those.
Hold off on:
Purchasing furniture, appliances or other expensive items for your new home.
Running up your credit card balances.
Buying a new car, boat, RV, motorcycle or other large item.
3: Keep it steady
The safest course of action is to keep your financial position similar to what it was at the time you submitted your application. It may seem counter-intuitive, but this includes holding off on making any large deposits.
If you feel the need for a large deposit or transfer, talk to your mortgage banker first to assess how this might affect your approval.
Stay the course by:
Not making large deposits or funds transfers without talking to your mortgage banker.
Not quitting your job.
Not taking large amounts of unpaid time off work.
Have a plan
If you know you won’t be able to avoid any of these financial moves during your mortgage loan process, talk to your mortgage banker. They may have suggestions or advice for creating a specific plan for reaching your homeownership goals. Up-front transparency is key here, helping to avoid any surprises later in the financing process.
