Preparing to purchase a home is an exhilarating prospect, and thoughts of moving in and personalizing the space may already be on your mind. However, before you get carried away with emotions, it’s crucial to consider key aspects between applying for your mortgage and the closing process. Here’s a checklist to bear in mind during the home loan application:
Avoid Large Cash Deposits
Lenders require traceable sources for your funds, and cash deposits can pose challenges in this regard. Before depositing any cash, discuss proper documentation procedures with your loan officer.
Refrain from Significant Purchases
Large purchases, not just related to your new home, can raise red flags for lenders. Accumulating new debt leads to higher debt-to-income ratios, affecting loan eligibility. Resist making substantial purchases, including furniture or appliances.
Don’t Cosign Loans
Cosigning for a loan makes you responsible for its success and repayment, impacting your debt-to-income ratios. Even if you won’t be the one making payments, lenders consider them in your financial profile.
Maintain Consistent Bank Accounts
Consistency in your accounts makes it easier for lenders to source and track your assets. Before transferring money, consult your loan officer to ensure seamless processing.
Avoid Applying for New Credit
New credit applications impact your credit score, whether it’s a credit card or a car loan. Multiple inquiries in different financial channels can influence your FICO® score, affecting your interest rate and approval eligibility.
Keep Accounts Open
Contrary to common belief, having less available credit doesn’t necessarily make you less risky. Closing accounts negatively affects your credit score, particularly the length and depth of your credit history and your credit usage as a percentage of available credit.
Discuss Changes with Your Lender
Communicate openly with your lender about any anticipated or recent changes in income, assets, or credit. This transparency ensures that adjustments can be made to secure approval for your home loan.
Bottom Line
For a smooth home purchase experience, consult your lender before making significant purchases, altering your financial landscape, or undergoing major life changes. Your lender, equipped to explain the potential impact on your home loan, is your best resource in navigating these financial decisions.
