As you are considering the purchase of a new home you should avoid doing anything that will have an adverse effect on your loan, from the time that you make an application for a mortgage through closing. During this time period it is of utmost importance to keep a stable financial position. How many people really know what financial pitfalls to avoid, missteps that could cost you thousands of dollars, or worse, jeopardize your ability to obtain financing at all.
Here are some suggestions for keeping financially fit:
THE DON’TS
Don’t Apply For New Credit Of Any Kind – We all receive a constant barrage of offers for new lines of credit – do not be tempted. If you open a new credit line the company will pull your credit report and this may have an adverse effect on your FICO credit score. This also applies to establishing credit for furniture and appliances for your new home – just wait.
Don’t Pay Off Collections Or Charge-Offs – Do not pay off collections unless specifically directed to by your lender. In general paying off old collections will cause a drop in your credit score.
Don’t Max Out Or Over Charge Existing Credit Cards – Running up your credit cards is the quickest way to bring your credit score down, and it can drop dramatically overnight. Try to keep your credit cards below 30% of the available limits.
Don’t Consolidate Debt To One Or Two Cards– If you close a credit card account it can effect your ratio of debt to available credit – which has an impact of 30% on your credit score. If you want to ditch a card or two, wait until after you close on your home.
Don’t Raise Red Flags To The Underwriter – Don not co-sign with another person on a loan, or change your personal information – the less activity that occurs the better.
Don’t Make Adjustments Or Transfers In Your Portfolio – Do not change investments, transfers positions in your investment portfolio, open or close accounts without the approval of your lender.
Don’t Make Large Unexplainable Deposits in Bank Accounts – Deposits that exceed past history will be questioned by an underwriter, unless the deposit involves a documented gift.
Don’t Make Changes With Your Employer Or Income – Employment stability is a large factor in the underwriting process. Leaving or changing jobs, or even positions within the same company, can endanger your approval. Notify your lender of any changes to your job, or income.
THE DO’S
Do Stay Current on Existing Accounts– Late payments on your existing mortgage, car payment, etc. can cost you dearly. One 30 day late payment can lower your credit score by 30 to 75 points.
Do Continue To Use Credit In Your Normal Manner– If you divert from your normal spending patterns it can raise red flags with your credit score, and can cause your score to drop. If you have made recurring payments for years to Comcast for your cable and Internet service, there is no reason to change it now, wait until after your closing.
Do Be In Contact With Your Loan Officer– Discuss any questions, or possible changes in your financial behavior with your loan officer. A phone call can save you a lot of unneeded angst.
If you have any questions concerning the mortgage process, give me a call.
Steve Madonna
Weichert Financial Services
(610)- 566-2045
NMLS # 140438
