The 10 Commandments When Applying For a Mortgage
Imagine this… A home buyer has met with their loan officer and obtained their pre-approval letter so they work with their agent to find the perfect home. Approximately 30 days later they are packing up their house in anticipation of closing on their new house in just a few days but they get a call from their loan officer and was told they were denied the mortgage. They immediately call their Real Estate Agent and learn that not only were they denied the loan but they also lost their earnest deposit and could face a lawsuit from the sellers of their dream home. It turns out the buyer went out and bought a bunch of new furniture and new appliances for their home and put it all on credit. When the mortgage lender did the final credit pull it showed on their credit and it threw their debt to income ratio off just enough that they can’t get approved.
If you want to avoid this horrifying experience, follow these Ten Commandments!
1. Thou shalt not change jobs, become self-employed or make any changes to their income sources.
2. Thou shalt not buy a new car – cash or financed. Even if the payments don’t start until after the closing. If you do, you might be living in it!
3. Thou shalt not open any new lines of credit – this includes furniture or appliance store cards that are delaying your payments for some time.
4. Thou shalt not apply for credit or have your credit pulled.
5. Thou shalt not spend any of your money in savings without asking your loan officer first.
6. Thou shalt not change bank accounts.
7. Thou shalt not make any large deposits without first checking with your loan officer.
8. Thou shalt not co-sign a loan for anyone.
9. Thou shalt not pay off any debts or pay down credit cards without first checking with your loan officer. You might think it’s helping but the loan officer might be counting that money you just spent as an asset.
10. Thou shalt not omit debts or liabilities from your loan application.
To make this very clear and easy…. DON’T TOUCH YOUR CREDIT OR FINANCES UNESS YOUR LOAN OFFICER SAYS IT’S OKAY!
Your loan officer may have provided you a pre-approval but your loan won’t actually be fully approved until the day of closing. The loan officer and/or mortgage lender will pull your credit right before closing to ensure nothing has changed. If your loan is denied because of a change you made and it’s not discovered until right before closing you will lose your earnest money deposit and the seller can sue you for any monetary loss they suffered by the contract cancellation this far along.