2019-09-18
7 Crucial Things You DO NOT Want to Do After Applying for a Mortgage

Hey, congratulations. You finally found the home that you fell in love with and now you're meeting with a mortgage company to apply for a mortgage. But did your loan officer or your real estate broker explain to you the things that you do not want to be doing from the time that you apply for a mortgage up until the day of closing? Well, stay tuned because I'm going to go over seven crucial things that you definitely do not want to be doing after you apply for a mortgage.

So you're excited, right? You found your dream home and now you've applied for a mortgage and undoubtedly you're willing to get out there and start making purchases. You want to start planning how you're going to paint the house, what furniture to buy and possibly, what landscaping designs you want to make. But before you do that, you might want to check with your loan officer because, in many cases, the loan officers and your real estate brokers don't always tell you these things. So I'm going to go into seven crucial steps that you definitely do not want to do as soon as you apply for a mortgage.

So let's get right into it.

  1. You don't want to change your jobs or the way that you're being paid. So in most cases, mortgage companies are going to want to see at least two year experience in the same job, or if you recently did change jobs, they want to see that you change from the same style, into the same field. Or if you graduated from college, they want to see that you get into the job field that you majored in college. You definitely don't want to be going from a salary job into a commission job and you definitely don't want to be going into a self-employment type of opportunity. See, the lenders want to see a steady income and they don't want to see any major changes.
  2. Don't deposit large amounts of cash into your bank account. See, the lenders want to see the transaction history and they want to see the money that you're putting into your account is basically coming from your salary. So if all of a sudden they see a big cash deposit into your bank account, they want to document that right away. They want to know where did you get that money and was it basically given to you as a loan and if you have to pay that back. So before you go making any cash deposits into your bank account, consult with your loan officer first to make sure that you know how you can document it.
  3. and this is a big one, I had some bad experiences earlier in my career with this and I learned really fast. So number three, do not go out making any big purchases like a new car or furniture for your new home because here's what happens. Once you go out and you do this and you put this on credit, you now create a new obligation and the lender's going to want to know what these obligations are. So now all of a sudden you have these new obligations. And it's going to mess up your debt to income ratio. And in many cases, if you take on too big of an application, it could end up causing you to get denied on your mortgage because now you've taken on too much debt.
  4. And I know this might sound crazy, but it's happened. Do not co-sign for any car loans or any big purchases for your friends or family, coworkers. Do not co-sign for anything because like I just stated in number three, you know, with new debt becomes new obligations. So even though you've co-signed, you now have an obligation that now is going to appear on your credit report. And again, this is going to have an effect on your debt to income ratio. And if you go out thinking that you're doing the best thing and a good thing for your family by co-signing on a new car, guess what? You may run the risk of getting your loan denied because now you've taken on too much debt.
  5. Don't change banks. Don't change the types of bank accounts that you have, whatever bank accounts you have, if you have a checking account and a savings account at the time when you apply for the mortgage, leave it alone. Do not go changing banks or anything because the banks want to see a normal source of transactions. And once you start jumping from bank to bank or adding a new savings account or taking away a checking account, or because you might be getting married and you're thinking, hey, we're going to have one bank account between the two of us. Don't do it because it's gonna mess up the transaction history and it could cause a problem.
  6. Don't apply for any new credit at all. Now, sometimes you may want to take two or three credit cards and try to merge them into one credit card and do debt consolidation. From the time that you apply for your mortgage until the day that you close, this is a big do not do. Do not go out and apply for any new credit trying to merge your loans into one and consolidate because again, you're just going to mess up that transaction history and it could cause some major problems.
  7. And this is an important one, okay. Don’t close out credit accounts. Whatever credit that you have right now, and if you have like say three or four credit cards and maybe you have an open line of credit someplace, don't close anything out. So even if you have a zero balance on a credit card, don't close it out because the credit agencies, they actually give you a score based on the fact that companies out there want to give you credit, but you don't use the credit. Now, I had a loan officer once tell me that as long as you keep your credit below 35%, the credit agencies are going to give you a very good score because they don't necessarily want you to max out your card, but yet they don't want you to always close out your card either. So if you do have a credit card, try to keep it below 35% of whatever the maximum amount is. So if you've got say $1,000 limit credit card, try not to go over $350. But the biggest thing, do not close that credit card out because once you do, it's going to affect your credit score and guess what? Your credit score is actually going to go down by doing that. So don't do anything until after you close on your mortgage.

So what's the bottom line here? The bottom line here is that when you meet with your loan officer and you sit down to do a loan application, that is the time that you want to be absolutely 100% honest with your loan officer as to what your debts and income are. Because believe you me, the credit agencies today, and when they pull your credit, they're going to find out one way or another what your credit actually is. So honesty with your loan officer is very, very important. You don't want to make any major changes to your credit until the time that you close. But if you do, if something comes up, the first thing that you want to do is you want to contact your loan officer and let them know if there was any changes or anything that's coming up. Okay?

I've seen people that unfortunately lost their job in the middle of a transaction. And if that happens, you've got to go to your loan officer because guess what? Many of these mortgage companies will do last minute credit checks and they'll do last minute job verifications. And if your loan is being approved and you're 30, 45 days into the transaction and then all of a sudden at the last minute, they find out that you lost your job, the loans going to get denied. And now because you waited so long, you may run the risk of losing your earnest money. So honesty is key here. Okay?

Hopefully this information you found was helpful and like I always say, if there's anything that I can do to help you, feel free to contact me.

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