8 Important things NOT to do when applying for a home loan
1. Don’t change your employment status. If you’ve been in a salaried position for 10 years, don’t switch to a job with a commission structure while you are waiting for your loan to get approved. Many loan programs require that people show at least a two-year history of the same kind of work or similar pay structure.
2. Don’t make any major purchases, such as cars or furniture. Doing this can affect your debt ratio and cause the loan to no longer qualify.
3. Don’t apply for a credit card, new loan, or co-sign for another loan.Applying for new accounts requires a credit rating report. Credit checks lower your credit rating, even if your rating is high. In addition, mortgage bankers have to count the new debt in the ratio, which can cause delays or change an approval to a denial.
4. Don’t change bank accounts or make undisclosed deposits or withdrawals unless you have a complete paper trail.
5. Don’t delay in providing all paperwork your loan officer asks for. Each step in the process has a deadline. Missing even one can cause a delay in closing and potentially put you at risk of losing the contract.
6. Don’t pay off collections or charge-offs before discussing it with your loan officer.Even paying off a negative debt can cause a credit score change. Again, you want your credit status to remain constant through the process.
7. Don’t close credit card accounts or increase credit card debt.Wait until after the loan closes to make these types of changes. Changes in credit limits and scores, even positive ones, can have negative consequences before closing.
8. Don’t pay cash for home or termite inspections.Often, these are costs paid at closing. To get reimbursed, you have to show more than a paper receipt. You have to show a canceled check or cashier’s check to prove payment.
What to expect during the loan application process
- Your loan application is taken by a loan office, credit is pulled and loan programs are discussed.
- Assets, income, and other documents are gathered and the loan is sent to the underwriter.
- At this point your loan office will address any debt, income, or other items of concern, OR move forward with the approval.