Applying for a mortgage is an exciting step toward buying a home, but it’s important to be mindful of certain actions that can jeopardize your loan approval. Lenders carefully assess your financial stability throughout the mortgage process and changes to your finances may lead to delays or even denials. To help you navigate this, here’s a list of things you should not do after applying for a mortgage.
Avoid Cash Deposits
Cash deposits often raise red flags for lenders. Cash is difficult to trace and lenders need a clear paper trail of your financial activities. Large cash deposits can result in delays as lenders may need multiple bank statements without those deposits, slowing down the approval process or causing a settlement delay.
Hold Off on Large Deposits
While it may seem harmless, making large deposits into your bank account can also complicate things. Always consult your lender before making significant deposits. They will likely require specific documentation to explain where the funds came from. Failing to provide this information can slow down your loan approval.
Don’t Take on New Credit
Lenders will re-verify your credit before settlement, so avoid making any purchases on credit. Large credit card purchases can increase your debt-to-income ratio and affect your credit score, putting your loan approval at risk.
No New Credit Applications
Similar to taking on new credit, applying for new credit cards or loans can negatively affect your credit score. Even inquiries into your credit can lower your score enough to put your mortgage in jeopardy, especially if you’re close to the lender’s cutoff.
Don’t Change Jobs
If you are thinking about switching jobs, it’s best to wait until after closing on your home. Lenders often require at least two recent pay stubs before settlement. If you change jobs and are paid bi-weekly, it means a four week delay to provide the required documentation. Your lender will also need to verify your employment before settlement.
Don’t Ignore Gift Instructions
If you’re receiving gift funds to help with your down payment, make sure you follow your lender’s instructions on how to transfer those funds. The process needs to be documented carefully and the donor will need to sign a gift letter to verify that the funds are indeed a gift, not a loan.
Don’t Risk Your Rate: Lock It In
Interest rates fluctuate, so if you’re happy with your current rate, consider locking it in. Waiting for rates to drop further may backfire and you’ll be stuck with a higher rate than you initially planned.
Don’t Neglect Lender-Realtor Communication
Privacy laws restrict lenders from discussing loan details with your realtor unless you’ve given them permission. Authorizing this communication helps streamline the process and allows your realtor to assist with any issues.
By following these guidelines, you’ll ensure a smoother mortgage approval process and avoid unnecessary complications. Buying a home is a significant investment. Taking these steps helps you close on your dream home without any surprises.