Keep on the straight and narrow while applying for a loan By Diana Lundin
You’ve made a decision to buy a house. From now until you close, you want to keep your nose clean when it comes to getting your home financed. Even if you have good credit, there are things you can do to make lenders think twice. It’s your responsibility to make sure that doesn’t happen.
Here are 10 things you don’t want to do while you’re in the process of buying a home.
- Don’t change your job before applying for a home loan. Along with that, now is not the right time to become self-employed or quit your job. You want to show lenders stability, which means you’ll be less likely to default on the loan.
- Don’t change banks. Like your employment, you want your banking history to show stability.
- Don’t buy a car or truck or any other form of transportation that you have to finance. Buying one increases your debt-to-income ratio and that’s something loan officers don’t want to see.
- Don’t buy furniture on credit before buying your house. Like financing a car, charging big-ticket items increases your debt-to-income ratio and now is not the time.
- Don’t be late on your credit card payments or charge excessively. You need a track record of responsibility and show that you can manage your money.
- Don’t make large deposits into your bank accounts. Lenders like the money that will be your down payment to be sitting in your account for at least two months – what they call “seasoning” – so that the funds don’t just appear out of the ether.
- Don’t lie on your loan application. Sounds simple, right? But don’t leave out any debts or liabilities you have or fudge your income. It’s fraud.
- Don’t co-sign a loan for anyone. Even if you’re not the one making the payments on that loan, it increases your debt-to-income ratio.
- Don’t have inquiries made into your credit. Looking for new credit translates into higher risk for lenders. If your inquiries are related to your mortgage search, it usually doesn’t affect your credit score because the assumption is you’re rate shopping. But opening credit accounts within a short period of time represents some risk and your credit could take a hit. It’s probably not a huge factor in your calculating your ability to repay a loan but why take a chance at this juncture?
- Don’t spend your money for closing costs. Part of the price of financing a loan is the closing costs and you’ll likely have some responsibility for paying them. Make sure you have enough for your share of the obligation.