Once you’ve applied for a mortgage to buy a home, there are many important things to keep in mind. While many people start thinking about moving in and decorating, large purchases can kill the deal. Here are the 10 Commandments of Buying a Home once you’ve applied for a home loan.
One: Thou shalt not change jobs, become self-employed, or quit your job. This is a huge deal, as many lenders will call and verify your employment status (as per your loan application) a day or two prior to closing. Some even verify the day of!
Two: Thou shalt not buy a car, truck, or van (or you may be living in it)! Large purchases can be red flags for lenders. If you have new debt, you have a higher debt-to-income ratio (debt compared to monthly income), which makes for a riskier loan. Therefore, you may no longer qualify for your mortgage. Buy the vehicle after you close on your home.
Three: Thou shalt not close any accounts, use charge cards excessively, or let your accounts fall behind. A major component of your credit score is the length and depth of your credit history (as opposed to just your payment history). Another component is your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those aspects of your score.
Four: Thou shalt not spend money you have set aside for closing.
Five: Thou shalt not omit debts or liabilities from your loan application. Be upfront when talking with your lender. Income, assets, and credit should be reviewed to ensure your home loan can still be approved.
Six: Thou shalt not buy furniture. (See #2 above.) Home-related purchases or otherwise can disqualify you from your loan. Resist the temptation until after you close!
Seven: Thou shalt not originate any new credit inquiries. Whether it’s a new credit card or a new car, a hard credit check will have an impact on your FICO score. Lower credit scores can change your mortgage interest rate and possibly your eligibility for approval.
Eight: Thou shalt not make large deposits without first checking with your loan officer. Lenders have to “source” your money, and cash isn’t easy to trace. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
Nine: Thou shalt not change bank accounts. Keeping the same accounts keeps your application consistent. Sourcing and tracking assets is much easier when there’s consistency.
Ten: Thou shalt not co-sign a loan for anyone. Once you co-sign for a loan, you’re accountable for the loan’s success and repayment. And there comes that debt-to-income ratio again (see #2 above). Even if you’re not responsible for the payments, the lender has to count them against you.
While you’re getting a loan, it’s best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature. Consult with your lender—someone who’s qualified to explain how your financial decisions may impact your home loan.
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