By Adrienne Brimhall, Flyhomes Mortgage
There are also unspoken rules regarding what NOT to do right before you apply for a mortgage.
Here are four common pitfalls that we have found can impact your ability to qualify for a mortgage—and how to avoid them.
Job or career changes
The pitfall: Although changing jobs is often necessary for someone who’s relocating, mortgage lenders look for employment stability.
A job change would be reviewed, a sudden career change may be scrutinized, and most lenders like to see a history with your new income.
How to avoid it: If you know you’ll be switching jobs, closing on your home at least two pay cycles after you start your new job is the best way to go, as you will have pay stubs to document your time there.
Applying for new credit lines
The pitfall: Opening new debt while you’re in the process of getting a loan will cause you to have to re-qualify, as the lender will have to reevaluate your financials.
Not only could opening a new line of credit dramatically slow down the loan process, your credit score may drop or your debt-to-income ratio may increase. Either of these changes can mean you no longer qualify for your loan.
How to avoid it: We recommend waiting until after your loan closes to open new credit lines. Similarly, try to avoid financing large furniture items … even if they charge 0% interest for several years, you’re still taking on a new monthly payment.
Closing major credit accounts
The pitfall: Your credit score is derived partly from your credit utilization ratio. Closing an account would impact your overall utilization and potentially impact the credit score used to qualify and price your loan.
How to avoid it: If you no longer use a credit card and would like to close it, consider keeping it open until after you close your loan.
Large deposits into your bank accounts
The pitfall: All deposits into your bank accounts that exceed 50% of your monthly income will need to be documented as being from an acceptable source. This is to verify that the funds you are using are truly yours and that you are not inflating your assets.
How to avoid it: If you transfer money, receive a gift, or liquidate assets, be sure to hold on to the supporting documentation.