Buying a home is one of the largest purchases most people make, but there are 7 things to avoid during the mortgage process. Getting pre-approved is the first thing you need to do. After that, it’s crucial not to change your financial situation. Avoid the events below prior to closing to ensure your path to a new home is as smooth as possible.
Don’t change jobs
Several factors can impact your loan if you change employers, or positions with your current employer. These can include your income calculation, DTI (debt-to-income ratio), and/or job stability. Also, do not change from a W-2 to a 1099 position or become self-employed. The loan amount that you qualify for can change if you don’t maintain the income or job time from your pre-approval.
Don’t make any major purchases
Major purchases include cars, boats, furniture, appliances, electronics or storage buildings. Your bank balance may drop if you use cash which may affect your down payment or reserve amounts. Your DTI may increase if you charge them on a credit card too. Or even worse, if you open a new credit account for the purchase, it can change your DTI and/or credit score. Hold off on these purchases until after your mortgage funds.
Don’t open any new credit account
This includes co-signing for someone else. Any new credit card, car loan, signature loan, or mortgage is a credit account. Even if you are not the primary account holder, co-signing for someone can affect an approval. Saving a few dollars on some clothes by opening a new store credit card can cost thousands over the life of a loan, because new accounts can change your DTI or your credit score, which may change the rate you get as well.
Don’t make large deposits
Large deposits are ones greater than 50% of your monthly qualifying income. For example, a $3,000 deposit listed on a bank statement for someone with a $5,000 per month income, would require documentation for the source of the deposit. Deposits like employment income, bonuses, tax refunds or Social Security benefits are not included, because the source is listed on the bank statement. Transfers from other asset accounts will have to be sourced. If the account where the deposit was transferred from has large deposits, those will have to be sourced as well. Your total assets will be reduced by any large deposits that cannot be sourced.
Don’t close anything
Changes in open and current credit accounts can have an affect on your credit score. These accounts are very impactful for credit depth and length of credit history. Closing current asset accounts can have an affect on down payment or reserves, and transferring them into new accounts my change the length of time an account’s asset need to be in there. Keep everything like it was when you applied for your mortgage.
Don’t leave town
Make sure to tell your loan officer if there is work travel or a vacation in your near future. You will likely need to provide additional documents during the processing and underwriting stages of your mortgage loan. Any delay in getting those can delay your closing. The loan officer can make arrangements if you let them know.
None of the 7 things to avoid during the mortgage process that we listed above will automatically disqualify you from being about to get final approval, but they are the most common disruptors that we see during the mortgage loan process. Contact the experts and advisors at Your BREW Team powered by Thrive Mortgage if any of these scenarios seem unavoidable. We will discuss the details of your situation and create a new strategy to keep it from becoming a road block to getting the keys to your new home!