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There are a few key things to keep in mind before you close on your dream home once you’ve applied for a mortgage. Getting ready to move in and decorate your new home is exciting. However, you should consult your lender before making any large purchases, transferring funds between accounts, or making significant life changes. Find out how your financial decisions may impact your home loan.
You should not do a few things after applying for a mortgage. The following are all essential points to remember or are just good reminders for the process.
1. Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender.
Lenders cannot trace cash, and lenders need to source your money. It would be best to talk to your loan officer about the proper way to document any cash deposited into your accounts.
2. Don’t Make Any Large Purchases Like a New Car or Furniture for Your Home.
Taking on new debt means taking on new monthly obligations. With new commitments come new qualifications. The debt to income ratio is higher for those who take on new debt. In the event of a higher ratio, qualified borrowers could no longer qualify for their mortgage because of the increased risk.
3. Don’t Co-Sign Other Loans for Anyone.
If you co-sign, you are obligated. As a result, your debt-to-income ratio will be higher. Your lender will still be able to count the payments against you even if you aren’t the party making the payments.
4. Don’t Change Bank Accounts.
Your lenders must be able to locate and track your assets. It’s easier for them to do so when all your accounts are consistent. Before you transfer any money, speak with your loan officer.
5. Don’t Apply for New Credit.
Whether it’s a new credit card or a new car, it doesn’t matter. Your credit score will be impacted when your credit report is reviewed by organizations from multiple financial channels (mortgage, credit card, auto, etc.), your credit score will be impacted. Low credit scores can influence your interest rate and may even affect your approval.
6. Don’t Close Any Credit Accounts.
Buyers often believe that having less available credit makes them less risky and more likely to get approved. However, this is not the case. An essential component of your credit score is the length and depth of your credit history (rather than just your payment history), as well as the percentage of credit used compared to available credit. You will suffer a negative impact on both of those factors when you close your accounts.
It is crucial to keep an eye on any changes in income, assets, or credit to ensure your home loan will still be approved. If your employment status or job has changed recently, tell your lender about it as well. Ideally, notify your loan officer of everything you intend to do before making any financial decisions. If you are ready to start the journey of buying a Denver area home, reach out. I would be happy to help you through the process and avoid any mistakes along the way.