The Don’t Do’s of Borrowing

The home buying process can be stressful but also exciting as well. Dreams of settling in, decorating, and enjoying a new home fill a buyer’s mind. But once you’ve applied for a mortgage, there are some key things to keep in mind—some things to avoid doing once you have applied for a loan.

 

Don’t Deposit Large Sums of Cash

Lenders need to identify the source of your money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, talk with your loan officer to discuss the best way to document your transaction(s).

 

Don’t Make Large Purchases

Any large purchase can send up a red flag for lenders. People with new debt have higher debt-to-income ratios—how much debt you have compared to your monthly income. Since higher ratios make for riskier loans, making a large purchase during the lending process can mean a borrower may no longer qualify for their mortgage. Resist the temptation to order those new appliances or furniture at this time.

 

Don’t Co-Sign Loans for Anyone

Even if you state that you won’t be the one making the payments, your lender will have the count the payments against you.

 

Don’t Switch Bank Accounts

As stated above, lenders need to source and track your assets. This task is easier for the lender when there is consistency among your accounts. Consult with your loan officer before transferring money to a new account.

 

Don’t Apply for New Credit

It can be tempting to save at a department store by applying for their credit card deal. Or perhaps you are searching for a new car. But remember that when you have your credit report run by organizations, it will have an impact on your FICO® score. Lower credit scores generally help with a better interest rate and possibly even your eligibility for approval. It should also go without saying that now is not the time to max out your credit cards or fall behind on payments.

 

Don’t Close Any Accounts

A major component of your credit score is the length and depth of credit history and your total usage of credit as a percentage of available credit. It is not just about your payment history. So, while it may seem counter-intuitive, hold off on closing any accounts during the lending process.

 

Don’t Switch Jobs

It is not ideal to switch jobs while you go through the lending process as lenders want a stable source of income. Of course, the situation may be beyond your control. If a job switch is a must, make sure to consult with your lender early on.

 

As you go through the purchase process, always keep in mind that, unless you are paying cash, you are also going through the borrowing process. Just as your agent is your partner in the purchase process, your loan officer is your partner in the lending process. It is important to communicate and share any changes in employment status, credit changes, and purchases. Consult with your loan officer before moving any money around. Taking these “Don’ts” seriously could make all the difference in qualifying for the home of your dreams!

Debbie Austin is a realtor associate with Keller Williams, Roseville and has been helping clients buy and sell property in the area for 18 years. If you have a specific real estate question you wish to see addressed, contact Debbie at debbieaustin@kw.com or debbieaustinrealty.com