All too often, people are approved for a loan and happily anticipating moving into a new home – only to find out at the last minute that their loan has been denied.
Why? Because they entered into avoidable situations that changed their desirability as borrowers. The bank no longer considers them credit-worthy.
Your loan officer should give you this information when you first apply for a loan. But we’ve found that in the excitement of a new home purchase, some consumers tend to forget the advice.
This “Don’t do list” can’t be repeated too often, because heeding its advice can make the difference between owning your dream home and remaining a tenant.
1. Don’t quit your current job
Some people think that the lender will not find out if they quit their job. They will. Most banks do a last minute verification of employment and that is when the problems begin. So stay in your current job until AFTER your loan closes.
2. Don’t transfer money between accounts. This just causes more paperwork for everyone involved. When you transfer money between checking and savings we have to show where the money came from. Try to use one account only for your real estate transaction; this avoids the big paper shuffle involved with this type of activity.
3. Don’t make large deposits in your accounts being used for the transaction. This is a huge problem for lenders. Deposits from your employer are fine, but cash deposits or gifts could cause your loan to be denied. Even money from the sale of a car could be an issue. Consult with your loan officer before depositing any money into the account being used to buy your new home.
4. If you do sell a car or other large item…Keep a careful record of the transaction. Write a dated, detailed bill of sale. Along with giving a copy to your buyer, have him or her sign and date a copy for your records. If paid by check, make a copy of the check. Then go talk with your lender before you do anything with it.
5. Don’t be late on any obligations If you are late on a credit card, car note or student loan, this could cause your credit scores to drop. In some cases the lender may re-pull your credit report at the last minute. Being late on obligations can cause your loan to be denied.
6. Don’t buy anything beyond the essentials. Restrict your shopping to groceries, gasoline, and other essentials. This is not the time to run up a credit card balance or deplete a checking account by buying large items, replenishing your wardrobe, etc.
7. Don’t go shopping and allow a sales person access to your Social Security Number. He or she will run a routine credit check in hopes of selling you something on credit. That inquiry could alter your credit score just enough to cause your loan to be denied.
You can buy furniture for that new house after your loan has closed. For now, restrain the impulse.
8. Don’t lease a new car. A lease is a financial obligation – so it will hurt you just as much as if you purchased a new car.
9. Don’t use your credit card as security to book a vacation, reserve a car rental or airline ticket, etc. On your credit report, it will look as if you’ve SPENT that money.
10. Don’t pay off a credit card balance without first checking with your lender.
11. Don’t open or close a credit account. Either activity will lower your credit score. A lower credit score can result in a higher mortgage interest rate or an outright denial of the loan.
12. Don’t co-sign a note or loan for anyone. This is a bad idea under any circumstances, but right now it could cause you to lose your house.
In short – don’t do anything that causes your credit picture to change in the slightest.
You were approved for your mortgage loan based on circumstances as they were on that day. Should any of those circumstances change, the loan could be denied.