The 10 Commandments for Prospective Buyers
I. Thou shalt not change jobs, become self-employed or quit your job.
Having a steady, provable income is important to securing a mortgage loan with the best interest rate and terms. Self-employment can make it trickier to show a consistent income. If you’ve recently changed jobs, it can also affect your qualification because it’s harder to know what the future will hold. If you have a steady job history and income, though, you should be in decent shape.
II. Thou shalt not buy a car, truck or van (or you may be living in it!).
Making a major expense (that usually comes with a high-interest loan or lease agreement attached) can impact your credit score, especially when applying for something as big as a mortgage loan.
III. Thou shalt not use credit cards excessively or let current accounts fall behind.
If you have a bad history with credit cards or a significant current credit card debt, it will definitely hurt your chances of qualifying for a home loan. Do your best to make sure your bills are paid and it will help you with your mortgage.
IV. Thou shalt not spend money you have set aside for closing.
When applying for a mortgage loan, you always have to keep in mind there will be closing costs and other expenses involved with buying a home, moving in, making upgrades, etc. Set aside that money and do not touch it until you are spending it as intended.
V. Thou shalt not omit debts or liabilities from your loan application.
Many mortgage applicants think that if they just leave off certain debts or liabilities, no one will know. The mortgage underwriting process is very thorough and your entire financial history will be reviewed before the loan is approved. Omitting information only makes the situation worse and will make you look like even more of a credit risk.
VI. Thou shalt not buy furniture on credit.
Furniture, appliances and other home goods may not be as big an expense as a car, but it’s all about how you pay. Don’t be tempted by credit offers and payment plans with high interest rates because those debts can affect your ability to be approve for your mortgage loan.
VII. Thou shalt not originate any inquiries into your credit.
There are a lot of sites out there offering free credit score checks for consumers. Some self-run credit checks can actually hurt your rating, so leave those to the professionals who will get the information they need when reviewing your loan application.
VIII. Thou shalt not make large deposits without checking with your loan officer.
If you make a sudden large deposit into a bank account during the mortgage lending process, it will look suspicious. No matter what the source of the money, be sure and check with your loan officer before making any large deposits. They’ll be able to help you make the right decisions and handle it in a better way.
IX. Thou shalt not change bank accounts.
Switching banks right before or during the mortgage loan approval process can be damaging. Lenders like to see stability and a strong financial history, which can be harder to prove when you just opened a new account with a new bank.
X. Thou shalt not co-sign for a loan with anyone.
This can be a tricky issue. Do everything you can to avoid having a co-signer on your loan. If it is your only option, then speak openly with your loan officer to make sound decisions for your financial future. The wrong decision now can end up affecting you years down the road.
Information provided by Nevada County Mortgage, September 17, 2018.