Congratulations! You have been approved for a mortgage.
But not so fast. Before you apply for that credit card at your nearest home improvement store, or buy that dream car for your future driveway, think about this. Your lender will recheck your credit profile just prior to your settlement as well as verify details such as your place of employment to make certain nothing has changed. And when they do recheck the figures, everything should be the same as it was when you applied. If it’s not, you risk having your home loan delayed or even canceled entirely.
Until your mortgage loan is signed and finalized, it is important to keep things the same across the board.
Avoid these 8 mistakes to ensure your settlement goes as smoothly as possible.
Do Not Apply for New Credit
Every time you apply for credit, it lowers your credit score. In addition to losing a few points from your score, it may also make your lender apprehensive. A new line of credit could mean you intend on spending up to your new credit limit, which in some cases could cause you to default on your home loan.
Do Not Close Your Credit Accounts
Financially speaking, closing unused credit accounts or transferring your debt to a single credit line, is smart. However, it is best to wait and make these changes after closing is complete as it will lower the points of your credit score.
Always Leave a Paper Trail
Your lender will ask to see your most recent bank statements prior to the settlement. Unusual deposits will show up on their radar, so make sure to provide complete documentation of where the money came from. An even better solution to this problem is to move all the cash for the home purchase into one account before starting the mortgage application. Otherwise, make certain you have complete and accurate records readily available for your lender.
Do Not Increase Your Debt
Your lender will recheck both your credit score and your debt-to-income ratio prior to signing your mortgage settlement, so it is extremely important not to accrue more debt than you originally claimed. Taking on more debt could cause you to go above the maximum acceptable debt-to-income ratio that your lender previously approved.
Do Not Skip a Payment or Make a Late Payment
Some homebuyers can make the mistake of getting so caught up in the move that they forget to keep up with paying other bills. And because one of the most important elements of your credit score is your history of on-time, in-full payments, that can be extremely detrimental. So, make a note on the calendar, put a reminder on your phone, or send yourself an email.
Do Not Buy a Car
Even if you can afford a new car, it’s still not a good idea. Any depletion of your savings or the addition of a new car loan could derail your mortgage application. It’s better to hold off on buying that new set of wheels until after you have moved in.
Don’t Change Jobs if You Can Help It
Changing jobs prior to a mortgage settlement could delay your settlement. Make certain you have pay stubs readily available to prove your current income as your lender will need to verify your employment hasn’t changed before your loan can go to settlement.
Don’t Spend Your Savings
There will be some cost at the time your mortgage is settled, including the closing costs and the down payment, so it is important that your funds stay in place until then. Make sure you haven’t exhausted your savings before the time comes to pay up. You’ll need the cash on hand at the settlement and your lender may even verify your accounts one more time before that.
Berkshire Hathaway HomeServices Beazley, REALTORS® specializes in finding homes that match a buyer’s needs and budget. For more information about real estate in Augusta, Georgia or Aiken, South Carolina, call Berkshire Hathaway HomeServices Beazley Realtors® at 706-863-1775 or contact us here.
