March 21st, 2016
If you’ve got performance evaluations coming up next week work, you should probably refrain from taking off an hour early or spending most of the workday twiddling away on your cell phone. Or, if you’ve just started training for a marathon, you probably should hold off on donuts and chocolate sundaes for a bit.
Similarly, if you’ve initiated the process to apply for a new mortgage, there are certain things you should refrain from doing if you want to put yourself in the best position possible to get the house (and down payment price) you want.
The following life changes and credit-impacting financial choices are just some of the things you should avoid until you’ve got the keys to your new home.
While it may seem like a lender would like to see that you’ve suddenly doubled your savings overnight, such an action can be seen as suspicious. If it’s perceived that a large amount of your income is generated by means other than yourself, a lender may question whether you’ll be making enough money over the long-haul to pay back the loan.
Lenders may also believe that those large sums of money are loans themselves, which further puts into question whether your paychecks will be enough to cover your monthly payments.
However, if you do expect to acquire large sums of money from relatives to cover the down payment, see if they can fill out paperwork that indicates the money they’re giving you are gifts and not loans.
Last, and it goes without saying – don’t give out huge loans to others during the mortgage process. The less overall money you have, the less favorably you’ll be seen by the lender.
One of the simplest ways to lower your credit score – though only by a little – is opening a new credit card account. You may be tempted to do this at your favorite retailer if they offer you a coupon or discount incentive for doing so. However, every time you do this, your spending habits are called into question by the credit bureaus.
Similarly, closing lines of credit can hurt your credit score as well – especially if they still had a balance at the time of closing. In general, keep your credit card situation (and number) stable throughout the process of getting a mortgage.
Lenders want to be able to work with a fairly consistent profile of the loan candidate throughout the mortgage process.
If you start off a single working female but halfway through the process become a married, unemployed expecting mother, those are two fairly different lending profiles that can change some of lenders’ decision-making.
There are some life changes you can’t prevent, such as illness or loss of a job. But, for those changes you have some control over – such as switching from working full-time to going to grad school or getting married – it’s best to wait until after everything with the mortgage is finalized.