If you’re planning on applying for a mortgage or pre-approval, there a couple common mistakes you will want to avoid just before and during the process. Take a look at the infographic below and be sure to communicate with your lender throughout the process.
Making a Major Purchase
Buying a new home or preparing to begin the process of finding your dream home is an exciting process. So much so that you might start making big purchases for your new home, such as expensive furniture, decor, or even a new car. This could result in new inquiries to your credit card or a reduced credit score that may delay your mortgage approval, negatively impact your loan terms, or result in a loan denial.
Falling Behind on Bills
In applying for new credit, like a mortgage loan, past credit history, including payment history may impact your credit score and, ultimately, your mortgage loan decision. Staying current on your monthly obligations is important in demonstrating your credit worthiness.
Maxing Out on Credit Cards
Similar to avoiding making a major purchase, keep an eye on your credit card balances. A higher ratio could be a potential red flag and you may have trouble getting approved for a loan or mortgage if your ratio is too high.
Should a new job opportunity come along while you’re in the homebuying process, take some time to evaluate the pros and cons. If your job change makes your income less predictable, such as moving from a salaried position to one based on commissions or bonuses, it could negatively impact your mortgage approval process or require you to provide additional documentation of expected income
Making a Large Deposit
Be weary of making a large deposit that could appear as “mattress money.” An unexplained deposit can threaten your loan qualification, especially if you can’t establish where those funds originated. If you have a large deposit in the most recent three month period, having a paper trail of the source of those funds will be helpful and useful to your mortgage loan origination team and the underwriting team.
Cosigning on a Loan
Helping a family member or friend co-sign on a loan is certainly a nice gesture. However, if you do this while you’re planning to buy a home, it could delay your approval process and require additional materials demonstrating payments by the co-signee. Additionally, this may impact your credit score, and make it harder for you to borrow for your own needs.