So, you have worked hard, paid down your debt, kept your bills paid in a timely manner, and applied for a home mortgage. This is wonderful news. However, do not put the cart before the horse and start spending money on your new home until you get your new home! So often home buyers are deluged with information on what to do before the mortgage application process. However, little attention is given to what NOT to do during the process. The following are 8 things to NOT do while going through the mortgage financing process.
Do not buy a new car or change the current lease terms of your current car.
Lenders look at your monthly obligations as compared to your monthly income. If you buy a car this will increase your debt to income ratio. Although your personal budget may indicate you can afford it, it will be a big mistake to purchase a new car at this time.
Do not quit your current job or change professions. The key word is stability.
Lenders are unlikely to approve a loan if there is not a track record of job security, longevity, and consistency. In most cases a lender will want 2 years proof of (consistent) employment. Click here to see what other documentation might be asked of you.
Do not switch from a salaried job to a heavily commissioned job.
There is a substantial difference between a salaried job, mostly consistent pay, versus a commissioned job, mostly unpredictable and varied pay. If you change from salaried employment to commissioned employment, you lose a track record of consistency. Lenders favor applicants staying consistent in their employment.
Do not transfer large sums of money between bank accounts.
The transfer of large sums of money will raise questions. All transfers need to be documented stating who, where, and when they came from. If you make a large transfer, you should be prepared to explain its origin. In some cases, a transfer may trigger an IRS audit.
Do not forget to pay your bills – even ones that may be in dispute.
It is important to keep your bills paid and current. Do not make late payments at any time during the process. The loan process checks and rechecks from beginning to end. You never know when they may be updating your file, and this update should show consistent proof of payment from first to last. Any disputed bills can be handled after you are approved for the loan and moved in.
Do not open new credit card account – even if they offer 20% off.
Additional credit cards are tempting at this time. However, all your credit card activities should remain stable. Make your payments on time, and do not charge any purchases at this time. Also, do not cancel any major credit cards. Any “out of the norm” activity could trigger an additional review. You want to keep credit card inquiries to a minimum. Click here for more on credit card management while applying for a mortgage.
Do not accept a cash gift without filling out the proper “gift” documentation.
If you are receiving financial assistance from a relative to help with down payment or other required funds, make sure to have all the proper documentation to satisfy who it is coming from, why you are receiving it and when it was made available. Document everything. Also, check with your lender and use any forms they require for monetary “gifts”.
Do not make random, undocumented deposits into your bank account.
Just like transferring large sums of money into your banking account, random, undocumented deposits will also raise questions. All deposits need to have documentation stating of who, where, and when they came from. If you make an undocumented deposit, you should be prepared to explain its origin. In some cases, this deposit may also trigger an IRS audit.
While you are working through the financing process and until you are through underwriting, approval, closing and moved into your new home, it is better to stay consistent steadfast with your employment and spending practices. Once you are moved in, the sky is limit if you do not put the cart before the horse. Avoid any sudden purchases or lifestyle changes. Congratulations on your new home purchase. If you have any other questions feel free to reach out to First Coast Realty on Facebook or Twitter and we would be happy to speak with you about what works for you. Or, to talk to an agent call/text today 904-494-8408 or email firstname.lastname@example.org
About the Authors: The above article "8 Things to NOT Do While Financing a Mortgage" was provided by First Coast Realty Inc. The agents at First Coast Realty have years of experience and have been successful in the St. Augustine and Northeast Florida area for for over 25 years. If you are looking to buy a home give us a call first to see if you can leverage our knowledge to your advantage. We service St Augustine, Palm Coast, Palatka, and Jacksonville areas.