You’ve started the process of applying for a home loan. It’s an exciting time, but you aren’t free and clear just yet. Even after you receive initial approval, there are some home loan mistakes that can cause problems when it’s time to finalize the deal. Awareness of these mistakes is the best way to ensure your home loan applications are successful right through the closing.
Mistakes to Avoid While Applying for a Home Loan
Avoid Large Sum Deposits
Just having money in your account isn’t enough for a mortgage lender. They want to know where the money came from to ensure you have legitimate sources of income.
If you must deposit a substantial amount of cash, tell your banker that you’re applying for a home loan. They can help you document the deposit properly.
Avoid New Credit Requests
New credit applications can temporarily lower your credit score. If you have a lower credit score the next time your lender checks, you could lose your pre-qualification or end up with a higher interest rate. Stay away from all credit applications until you have officially closed on your new home.
Don’t Co-sign for Others
When you agree to co-sign a loan, you’re responsible for the repayment of the loan even if someone else is intending to make the monthly payments. Your mortgage lender will count that debt against you, increasing your debt-to-income ratio. It could mean higher interest rates or even denial of your own home loan applications.
Avoid Bank Account Changes
When you submit home loan applications, the lender will track your assets. They’re looking for a stable financial history that convinces them you can afford to pay your home loan back on time. Changing bank accounts only makes that process more complicated.
Maintain All Accounts
Now is not the time to clean up your credit portfolio. You may have credit cards that you never use or lines of credit that you’ve been meaning to close. Keep everything open and stable until you’re moving into your new home with the loan finalized. Closing even one account could impact your credit utilization ratio or overall credit score.
Hold Off on Large Purchases
If you take on new debt while applying for a house loan, it could look like a warning sign to a lender. They may look harder at your overall debt and income to make sure you aren’t financially overextending yourself. If they determine that you may struggle to service your home loan in addition to payments on that new large purchase, you could cost yourself a successful home loan application.
Seek Expert Guidance
Even when you think you’re doing it all right, there’s potential for home loan mistakes. That’s why we recommend you work closely with a trusted professional who understands the real estate industry. When you’re serious about applying for a home loan and want it to go smoothly, we’re here for you.
Contact us to move through the buying process without unnecessary stress. Protecting your financial status with the above tips is just the starting point. We’re ready to help with the next steps.