Congratulations on considering purchasing a home, it’s an exciting time for you! However, before you dive into the process of speaking to lenders and securing a home mortgage loan, it’s very important to understand what you should avoid during this process to ensure a smooth and successful experience.
Here’s a list of things to steer clear of when looking to get a home mortgage loan:
Do not buy a car before you apply for a home loan
It may be tempting to purchase a new car before buying a home, but it’s best to hold off until after you’ve secured your home loan. When you take out an auto loan, it will appear on your credit report and impact your debt-to-income ratio, which is a critical factor in obtaining a mortgage.
Do not transfer assets from one bank account to another
Moving funds between bank accounts may raise red flags for lenders. If you need to transfer funds, be sure to document the transfer and keep a paper trail for your lender.
Do not change jobs or career paths
Lenders prefer borrowers with a stable employment history, so changing jobs or career paths during the home loan process can be detrimental to your loan application. If you must switch jobs, do so before applying for a loan or wait until after closing on your new home.
Do not buy new furniture or major appliances for your new home
While it’s exciting to start planning for your new home, making major purchases before obtaining a home loan can negatively impact your debt-to-income ratio and credit score. Hold off on buying new furniture and appliances until after closing on your new home.
Do not run a credit report on yourself
Applying for credit or loans while in the home loan process can impact your credit score and debt-to-income ratio. Avoid running your credit report on your own. The lender will run a credit report on you and they are required to provide you a copy, so you will find out more than enough information based on that report. One important thing to keep in mind is the fact that you can have multiple lenders pull your credit (usually within a 90 day period) and the credit agencies will pool these credit pulls together, knowing that you’re house shopping and won’t hold it against you.
Do not attempt to consolidate bills before speaking with your lender
Consolidating bills can be a helpful way to simplify your finances, but it can also impact your debt-to-income ratio and credit score. Speak with your lender before attempting to consolidate bills to ensure it won’t negatively impact your home loan application.
Do not pack or ship valuable and useful information needed for the loan application
Make sure you have all the necessary documentation for your home loan application before packing or shipping any important documents. Keep them in a safe and accessible place.
Do not apply for any other loans or credit cards
Applying for additional loans or credit cards can impact your credit score and debt-to-income ratio, potentially jeopardizing your home loan application. Hold off on any new credit until after closing on your new home.
Do not run up your credit card utilization percentage above 30%
Maxing out your credit cards can have a negative impact on your credit score and debt-to-income ratio, making it harder to secure a home loan. Keep your credit card balances below 30% of your available credit limit.
Changing your name or marital status
Changing your name or marital status during the home loan process can complicate your loan application and delay the process. It’s best to avoid this status until after closing on your new home.
Not checking your credit report for errors
Errors on your credit report can impact your credit score and debt-to-income ratio, potentially jeopardizing your home loan application. Check your credit report for errors and dispute any mistakes before applying for a home loan.
Making large deposits without documentation
Large deposits that cannot be traced or documented may raise red flags for lenders. It’s best to avoid making large deposits before applying for a home loan, or to document the source of the deposit.
Co-signing on someone else’s loan
If you’re a nice person and are open to co-signing on someone else’s loan, I would wait until after you apply for a home loan because it can negatively affect your credit score and debt-to-income ratio, potentially making it more difficult to secure your own loan.
Don’t be intimidated by the long list, it’s even easier than it sounds. By avoiding these common mistakes, you can increase your chances of successfully securing a mortgage and purchasing the home your love.
Need to connect with a lender?
Remember to speak with your lender about any concerns or questions you may have during the home loan process.
If you need recommendations for an amazing local lender, please click here to view my preferred lenders and feel free to contact them (please let them know Brett Hickey referred you and they will take care of you!)