If you are considering the purchase of a new home or exploring new financing on your current home, you should not do anything that could adversely affect your loan approval process. It is tempting to begin making your new house a home or to spend your new savings on fixing your existing home, but this is the time to keep your financial picture stable until your loan closes. The key is to call your lender if you wish to change your financial structure. Even the most logically beneficial moves can backfire, cost you thousands of dollars, or affect your ability to obtain financing. To have your pre-approval or loan commitment remain valid, please pay close attention to the do’s and don’ts below:
The Do’s:
Do stay current on existing accounts. Late payments on your existing mortgage, car payment, or anything else that can be reported to a CRA (Credit Reporting Agency) can cost you dearly. One 30-day late payment can lower your credit score significantly. Make your mortgage payments on time, but call your loan officer before making any payments scheduled within two weeks of closing.
Do continue to use your credit as you normally would. Red flags are easily raised within the scoring system. If it appears you are diverting from your standard spending patterns, it could cause your score to go down. For example, if you’ve had a monthly service for internet access billed to the same credit card for the past three years, there’s no reason to drop it now. Again, make your changes after the loan funds.
Do call your loan officer with questions. If you have any questions during the loan process, they are there to help and are just a phone call away. These home loan process FAQs can also be helpful.
Do check your email frequently. Although most loan officers prefer to send written correspondence, you can always call to discuss any questions.
The Don’ts:
Don’t apply for new credit of any kind. If you receive invitations to apply for new lines of credit, don’t respond. If you do, that company will pull your credit report, which could affect your credit score. Likewise, avoid establishing new lines of credit for furniture, appliances, computers, etc.
Don’t max out or overcharge existing credit cards. Running up your credit cards is the fastest way to bring your score down; it could drop up to 100 points overnight. Once you are engaged in the loan process, keep your credit cards below 30% of the available limit.
Don’t close credit card accounts. If you close a credit card account, it can affect your ratio of debt to available credit. If you want to close an account, do it after you close your mortgage loan.
Don’t raise red flags to the underwriter. Don’t co-sign on another person’s loan or change your name and address. The less activity occurs while your loan is processed, the better it is for you.
Don't make any adjustments or transfers in your asset picture. Don’t change investments, move positions, close accounts, open new accounts, or substantially change your assets without contacting your lender first.
Don’t make changes to your employment or income. Employment stability is a significant factor in the underwriting loan process. Quitting or changing jobs or positions within the same company may affect or delay your loan approval process. Inform your loan officer immediately of your career, position, or income changes.
If you follow these simple guidelines during the loan process, you could have a smoother experience and potentially save hundreds of dollars. For more about the home loan process, contact the experts at NASB at 888-661-1982.
*NASB does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal, or accounting advice. North American Savings Bank is not a credit counseling agency, credit repair organization, debt settlement company, or similar service. North American Savings Bank does not guarantee or promise regarding the results obtained. You should consult your tax, legal, and accounting advisors before engaging in any transaction.
