Things To Avoid During Home Loan Process To Close On Time
In this guide, we will cover things to avoid during home loan process to close on time. We have covered many blogs on what to do to get a mortgage loan approval. During home loan approval, borrowers must be pins and needles with their credit and finances. There are several things to avoid during home loan process, advises Marga Jurilla, a loan officer at Non-QM Mortgage Brokers.
After a borrower gets a conditional mortgage approval, there are things to avoid during home loan process. Remember, lenders, can disqualify borrowers at any time. This holds true even after a written mortgage loan approval.
Borrowers need to be super careful from when a mortgage approval has been issued to when the loan has closed. Mortgage lenders will pull credit again before you close. If the lender sees credit inquiries, they will check whether or not if you opened new credit tradelines. Just because you got a pre-approval and your mortgage loan is in progress does not mean you are home free.
Things To Avoid During Home Loan Process Is Opening Bank Accounts
One of the things to avoid during home loan process is that borrowers should not open new bank accounts or close existing ones. Lenders will ask for updated bank statements and want to see a history of bank deposits and withdrawals. Do not submit multiple bank statements if you do not have to. Just turn in bank statements where you have the money for the down payment and closing costs.
Lenders will request two months of bank statements when you apply for a mortgage loan. However, this does not mean that you need to submit all of your bank statements. Lenders want to see just the bank account that you have the down payment and closing costs.
Changing bank accounts will often lead to confusion. This can cause possible delays on a clear to close. All funds used for the down payment need to be seasoned. Bank statements will be scrutinized until the date of the closing. Do not turn in two months of bank statements if you have overdrafts in the past 12 months. Go to the bank and get two months of bank printouts. Have the teller sign, stamp, and date the two months of bank printouts. Bank printouts do not show the year-to-date overdraft charges.
Monitor Bank Accounts During The Mortgage Process
Always cooperate with your mortgage lender’s requests for documentation, even though it might seem petty. Mortgage Underwriters might want to know why there was a $100 deposit or a $300 withdrawal from bank accounts. Many folks might feel like telling lenders to mind their own business.
However, borrowers need to realize that underwriters may ask for things that may be petty. If borrowers do not cooperate, they will not approve the loan.
Do Not Quit Job During Mortgage Process
Borrowers should not change jobs and give notice of terminating employment until after they close on their home loan. Mortgage lenders require a two-year history of employment. Alex Carlucci of Non-QM Mortgage Brokers said the following:
Changing jobs with the same salary will not disqualify borrowers from getting a mortgage loan closed, but it can cause a delays
For borrowers who need to change jobs during the mortgage loan process, a new verification of employment will be required, as well as 30 days of paycheck stubs before the issuance of a clear to close
Do Not Co-Sign Before Or During The Mortgage Process
Under no circumstances co-sign for anyone. If you co-sign for anyone, your debt will count against your debt-t0-income ratio. The debt-to-income ratio will be affected if you co-sign for someone even though the main borrower is making the payment. If you co-sign for someone and the main borrower defaults on their obligations, your credit will get affected. Angie Torres, the National Operations Director at Non-QM Mortgage Brokers, issued the following warning about co-signing:
Co-signers are risking potential risk by co-signing. If the main borrower default on their obligations, the co-siginer will get affected as well. Please think twice when co-signing.
If you are planning on buying a house and becoming a non-occupant co-borrower, you can qualify for a mortgage after the main borrower has made 12 timely payments on their mortgage payments. The main borrower must prove they have made timely payments for the past 12 months.
Cosigning for a child or relative for a car loan or some other loan might disqualify borrowers from mortgage loans going further. This is because lenders will consider the new debt against the debt-to-income ratio. Hard Inquiries harm credit scores.
Things To Avoid During Home Loan Process Do Not Apply For Credit
Do not shop for any mortgages or any other credit. When consumers apply for new credit, creditors will make a hard credit inquiry. A hard credit inquiry will drop credit scores. Margarett Jurilla, a loan officer at Non-QM Mortgage Brokers, advised on the following for mortgage loan applicants during the mortgage process:
Do not apply for any credit cards or any other credit. Each credit check will cause a drop in credit scores. The mortgage lender will check credit scores again before the final closing. Lenders will need written letters of explanation on each credit inquiry.
Many borrowers tend to apply for credit cards from furniture stores where they are off 0% financing and no payments until a future date. Applying for credit from a furniture store and purchasing the furniture now will cause debt ratios to go up, credit scores to go down, and possibly cause mortgage loans to get denied.
Do Not Make Large Purchases During The Mortgage Process
If there are changes of circumstances or will have changes of circumstances during the mortgage process, always let the loan officer know mortgage. Remember, the mortgage loan officer is on your side. Ronda Butts of Non-QM Mortgage Brokers said the following about borrowers during the mortgage process:
The loan officer will be the borrower’s best ally while the mortgage loan is being underwriting. For example, borrowers who need to buy a new car because the old car is not repairable MUST talk to a loan officer before incurring new debt.
Borrowers who change marital status or anything dramatic must inform the loan officer. You cannot be going through a divorce during the mortgage process. You can get married during the mortgage process. However, if you go through a divorce, most lenders will require the divorce to become final before approving you for a mortgage.
Do Not Pay Collections And Charged-Off Accounts
Do not, under any circumstances, pay off any old collection accounts unless instructed by the mortgage loan originator.
Paying an old collection account or making a partial payment for that new activity will trigger the last of last activity date of the derogatory credit line item and drop the credit score. Do not be late with any payments from the time of pre-approval to the closing.
Mortgage loan closing can get delayed or denied. This is because a borrower has innocently missed making a credit card or auto loan payment. Timely payments in the past 12 months is crucial in getting an automated approval. If you overlook a missed payment, contact the creditor and see if the creditor will remove the late payment as a one time good will courtesy. Chances are that it may not work but it is worth the try.
It is easy to overlook a monthly payment when packing and preparing for the big move to a new home. But unfortunately, a late payment can cause a mortgage loan denial. One or two late payments on a non-mortgage payment are not always a deal killer. However, multiple late payments will not get you an approve/eligible per the automated underwriting system. If you have any questions about the content of this guide on things to avoid during home loan process or need to get qualified for a mortgage, don’t hesitate to contact us at 262-627-1965. Text us for a faster response. Or email us at gcho@gustancho.com. The team at Non-QM Mortgage Brokers is available seven days a week, evenings, weekends, and holidays.
This BLOG on things to avoid during home loan process Was UPDATED on May 6th, 2023.
