People do a lot of crazy things after they apply for a home loan. Many of these things, unfortunately, get their loans denied. Take a look at some of the all too common mistakes made by people and then try to avoid making them yourself.
This is one of the all time worst things that you can possibly do. Unless you have a huge opportunity on your hands, you should not change jobs or become self employed after filing a mortgage application.
Your lender needs to see stability and they need to know that you will be able to make the payments on your new mortgage. If you are employed, the best way to do that is to show that you have been at your job as long as possible, so try to stick.
As for becoming self employed, now is not the time. It is far more difficult to get a mortgage as a self employed individual. A lender generally needs to see two years of self employment income which means, if you strike out on your own now, that loan will likely get denied.
Paying With Plastic
The second biggest factor involved with your credit score is credit utilization. This is the amount of your available credit you are using. To be considered good, you need to keep this ratio under 30 percent. If you want to have excellent utilization, get it under 10 percent. This means that if you have 15,000 dollars in available credit, you should be using less than 1500 dollars of it.
The last thing that you want to do when you apply for a mortgage is send this ration in the wrong direction. So, lay off the plastic.
Buying A New Car
This is another mistake that people often make. Buying a new car makes your lender question what else you might be purchasing on credit. It also will likely result in 3 or 4 inquiries on your report and a new account showing up, all of which can drop your score. The only reason to purchase a new vehicle while applying for a home loan is because of an emergency, such as your current vehicle being totaled or stolen.
Making Strange Deposits
The mortgage underwriter will pay close attention to all of your accounts. They want to know exactly where your money is coming from so that they can make sure that you are not incurring any extra debt.
Large deposits could reflect a loan that is unaccounted for and that loan payment could affect your ability to pay for your mortgage loan.
In the months leading up to your mortgage, try to keep your accounts ac calm as possible. Continue this all through the mortgage process to avoid any potential problems.
Moving To A New Bank
Changing banks just complicates the mortgage process and will likely agitate your underwriter. During the mortgage process, all of your accounts will be closely scrutinized. Why add another potential problem into the mix?
You might never plan on using that paid off credit card but now is not the time to close it. In fact, unless it has an annual fee, you should never close a credit card account.
There are two problems in closing a credit card. First, you lower your available credit. By doing so, you also throw off your credit utilization. If you have 2500 dollars in credit card debt with 10,000 dollars available, you are sitting pretty at 25 percent utilization. Close a 2000 dollar credit card and your utilization jumps to over 30 percent. That will lower your credit score substantially.
The other problem is that closing an account could lower your overall credit age. If you have had that credit card for 10 plus years, your average age of credit could be reduced and you could lose points on your score.
If you are gung ho about closing accounts, do so after you close on your mortgage.
Spending Your Savings
Just because you have enough money to cover your down payment does not mean that you can go and spend the rest of your savings. Stability is what you need to be showing during this period of your life. Any change to your financial picture could potentially jeopardize that mortgage.