10 Things NOT To Do During The Mortgage Process: Your Mortgage Survival Guide

  • Posted on December 30, 2021 by Price Mortgage
Mortgage Process

The mortgage application process is complicated and intimidating. There are many different things to take into consideration before you even start the process, but once you do, it can be a little overwhelming. The good news is that there are plenty of resources out there to help with this process.

We’ve compiled 10 things NOT to do before applying for a mortgage so that your journey through the loan application process goes as smoothly as possible!

1. Not Keeping An Eye On Your Credit

Credit scores are one of the most important factors when you apply for a mortgage. A good credit score is needed in order to get approved for your loan, so it’s very important that this number stays high throughout the process! Keeping an eye on your credit report and score can help prevent problems down the road.  It’ll also help you get an idea of what kind of interest rate you could qualify for.

If your credit score is low, there are ways to improve it before applying for a mortgage.  There are also companies that offer credit counseling services if needed.

Don’t forget: even if your credit score is good, make sure to keep an eye on it! The mortgage process is long, and your score could change in the time between when you apply and when your loan closes.

While we have many loan programs for all credit score ranges, typically a score of 720+ will get you the best rate.

2. Missing Credit Card and Other Bill Payments

This is a big one, mortgage lenders hate when you miss payments.  If your credit score is already not great, missing any bill payments might make it worse!

Missing a payment on one of your bills can also hurt your ability to qualify for a mortgage if the missed payment shows up on your credit report and brings down that all important number.

The underwriter will question your ability to pay your mortgage payment on time if you are late on smaller monthly installments.

3. Take On New Debt

It’s important not to take on any new debt before applying for a mortgage. This means no new credit cards, car loans, or personal loans.

The last thing you want is for your debt-to-income (DTI) ratio to be too high when you apply for a mortgage. This number is one of the most important factors that determines whether or not you will be approved for a loan.

4. Apply For New Credit Lines

Similar to the point above, you should refrain from applying for new lines of credit as this may temporarily bring down your credit score.

When you apply for a mortgage, the lender will order what’s called a “triple-check” on your credit report. This means that they will check not only your credit score but also all of your open lines of credit and how much debt you currently owe.

The lender will also re-check your credit before close of escrow, any new items on the credit report will be a red flag more often than not.

5. Become a Co-Signer On Other Debts

This is another big one.  Before applying for a mortgage, you should not become a co-signer on your or family members debts, or even worse – a friends debt.

If you do decide to take this route, it’s important to realize that if they miss their payments the lender will hole both of you accountable for the missed payment, and will most likely report the missed payment to the credit bureaus. This means that even though you may have not taken on this debt yourself, it can still impact your credit and your ability to get a loan. Additionally, this debt will count towards your DTI ratio.

This might seem harsh but the fact is that lenders don’t want you taking on additional risk by becoming a co-signer or guarantor for someone else’s debts.

6. Close Old Credit Accounts

Never close old credit accounts if you don’t have to. A big factor in your credit score is your credit history and length of open accounts. By closing an account you’re just hurting yourself.

The longer that credit account has been open the more impact it will have on your credit, specifically because of its age. If you are applying for a mortgage within the next year or two keeping those old accounts can help keep your overall DTI ratio down as well!

7. Make Large Purchases

If you are applying for a mortgage then it’s best to avoid making large purchases before closing on the house.

This is because lenders will take into consideration any new debt that you have taken out within the past few months when they assess your DTI ratio, which determines how much of a risk lending money to you is. If this number is too high, you may not be approved for a loan.

Large purchases can also include things like furniture, cars, or vacations. Try to wait until after you have closed on your new home before making any big ticket purchases!

8. Deplete Your Savings Account

We recommend not spending all of your savings on down payments and closing costs!

You’re going to need that money for things like moving expenses and new furniture.

It’s important to have a cushion saved up in case of any unexpected expenses that may come up after you move into your new home.

Lenders like to see that you have emergency savings as well – this shows that you have a good handle on your finances and can plan accordingly.

9. Suddenly Change Jobs Or Take Extended Time Off

Lenders like to see that you have been at the same job for a minimum of two years. If they don’t know much about your employment history, or if it’s erratic in nature, then this will count against you when applying for a loan.

If you are changing jobs soon before applying for a mortgage, make sure to let your mortgage broker know so we can disclose it to the lender before surprising them mid-way through the process.

A gap in employment is a red flag to many lenders. If you have taken extended time off of work recently, paid or unpaid – now is the time to start working again before applying for a mortgage. This will show stability and responsibility with regards to financial obligations, which is something that lenders like to see.

10. Make Large Deposits Without Documentation

Lenders like to know where you are getting your money from. This means that if you make large deposits into your account without any documentation, this might set off alarm bells for them and they may not feel comfortable lending you the money until all questions have been answered.

It’s important to stay on top of these rules so that everything goes smoothly for you!

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