This is a list of things to steer clear of when you are seeking to obtain financing for a home. The following items may prove to be a detriment when you wish to move forward with the loan process.
- Don’t open any new credit accounts, especially buying or leasing a vehicle! Brand new lines of credit can bring your score down by lowering your average history length of your credit accounts. Lenders also look carefully at your debt-to-income ratio or DTI. A large payment such as a car lease or purchase can greatly impact those ratios and prevent you from qualifying for a home loan.
- Don’t transfer your assets between bank accounts! Moving money around ends up complicating things because the transfer of money must be documented. In addition, if you have any unusual deposits of cash, the lender is going to want to know where it came from. You can consolidate your accounts later if you need to.
- Don’t change jobs! A new job may involve a probation period, which must be satisfied before income from the new job can be considered for qualifying purposes.
- Don’t make any large purchase during or right before the loan approval process. (This includes furniture and appliances for the home.) New purchases can increase your debt to income ratio to the point that you will no longer qualify for the mortgage you are applying for.
- Don’t put your information on “lending” websites like LendingTree.com or anything similar. These website are not lenders but marketing companies that sell your information to multiple lenders (I have seen as many as 25). Each of these lenders will pull your credit to see what you qualify for. ALL inquires must be explained during the lending process and too many pulls can lower your credit score.
- Don’t transfer balance around on your credit cards. An experienced lender can advise you if any money should be transferred and how much. Also, if you recently paid off or substantially reduced the balance on debt, contact the company and get something on their letterhead stating your new balance.
Do not pack away your important documents. (Tax returns, W-2s, Bank Statements, Military Paperwork, Bankruptcy Paperwork, divorce/child support papers, etc.) These things are crucial to the loan process and having to dig through boxes to find them will only waste valuable time.
