Things Not to Do During the Home Loan Process

# How to Avoid These Common Mistakes During the Mortgage Loan Process

If you’re thinking of buying a home, you probably know that getting a mortgage is one of the most important steps. But did you know that there are some things you should avoid doing during the mortgage loan process? These mistakes can jeopardize your chances of getting approved or delay your closing date.

As your trusted mortgage broker, I want to help you achieve your homeownership dreams. That’s why I’ve compiled this list of things to avoid during the mortgage loan process. By following these guidelines, you can ensure a smooth and successful mortgage application.

## Employment

Your employment status and income are key factors that lenders consider when evaluating your ability to repay the loan. Any changes in your employment situation can raise red flags and cause delays or denials. Here are some things you should avoid doing:

– Do not change jobs, become self-employed, or quit your job. Lenders want to see stability and consistency in your income. Changing jobs can make them question your reliability and future earnings. If you must change jobs, make sure you have a written offer letter and can explain the reasons for the change.
– Do not cut back your hours at work. Reducing your hours can lower your income and affect your debt-to-income ratio, which is another key factor that lenders look at. If you have a variable income, such as commissions or bonuses, make sure you can document your average income over the past two years.

## Credit

Your credit score and history are another major factor that lenders use to determine your eligibility and interest rate for a mortgage. Any changes in your credit situation can negatively impact your score and raise questions about your financial responsibility. Here are some things you should avoid doing:

– Do not apply for new credit. Every time you apply for a new credit card, loan, or line of credit, it generates a hard inquiry on your credit report, which can lower your score by a few points. Applying for new credit also increases your debt load, which can affect your debt-to-income ratio and make you look riskier to lenders.
– Do not charge up an account or buy furniture for your new home on credit. Adding new balances to your existing accounts can increase your credit utilization ratio, which is the percentage of available credit that you’re using. A high credit utilization ratio can lower your score and signal that you’re overextended. It’s best to wait until after closing to make any big purchases for your new home.
– Do not buy anything on “90 days same as cash”. Some retailers offer this option as a way to entice customers to buy their products without paying interest for a certain period of time. However, this is still considered a form of credit and can show up on your credit report as a new account or an installment loan. This can lower your score and affect your debt-to-income ratio.
– Do not buy or lease a car. Buying or leasing a car is one of the worst things you can do during the mortgage loan process. Not only does it add a new account and a large balance to your credit report, but it also increases your monthly expenses and reduces the amount of money you can qualify for a mortgage.
– Do not stop making your regular payments for any and all credit obligations. This may seem obvious, but some people may think that they can skip a payment or pay less than the minimum amount due because they’re getting a mortgage soon. This is a big mistake that can ruin your credit score and cause late fees and penalties. Make sure you pay all your bills on time and in full every month until closing.
– Do not file for bankruptcy. Filing for bankruptcy is one of the most damaging things you can do to your credit score and history. It can stay on your report for up to 10 years and make it very difficult to qualify for any type of credit, including a mortgage. If you’re considering bankruptcy as an option, talk to a financial counselor or an attorney first.
– Do not defer your payments on your mortgage. Some lenders may offer forbearance or deferment options for borrowers who are experiencing financial hardship due to the COVID-19 pandemic or other reasons. While this may seem like a relief, it can also have negative consequences for your mortgage application. Depending on how the lender reports the deferred payments to the credit bureaus, it may lower your score or show up as delinquent payments on your report. If you’re in forbearance or deferment, make sure you communicate with your lender and resume making payments as soon as possible.

– Do not co-sign on a loan for anyone else. Co-signing on a loan means that you’re responsible for the debt if the primary borrower fails to pay. This can affect your credit score and your debt-to-income ratio, as well as expose you to legal liability. Avoid co-signing on any loans during the mortgage loan process, unless you’re absolutely sure you can afford it and trust the other person.

## Assets

Your assets are another factor that lenders look at when evaluating your financial situation. They want to see that you have enough money for the down payment, closing costs, and reserves. Any changes in your asset accounts can raise questions and require additional documentation. Here are some things you should avoid doing:

– Do not switch banks or move money around. Lenders need to verify the source and history of your funds for the mortgage. If you switch banks or move money between accounts, it can create confusion and delays. Try to keep your accounts stable and consistent during the mortgage loan process.
– Do not deposit cash into your bank account. Cash deposits are hard to trace and verify. Lenders may suspect that you’re borrowing money from someone else or engaging in illegal activities. If you have any cash deposits, make sure you can document where they came from and why they’re not a loan.
– Do not sell any item worth more than $100 without first speaking to your loan officer. Selling items such as furniture, jewelry, or electronics can also create problems for your mortgage application. Lenders may wonder why you’re selling your belongings and if you’re in financial trouble. If you need to sell something, make sure you have a bill of sale and a receipt to prove it.

## Conclusion

Buying a home is an exciting and rewarding experience, but it also requires careful planning and preparation. By avoiding these common mistakes during the mortgage loan process, you can increase your chances of getting approved and closing on time.

As your trusted mortgage broker, I’m here to help you with any questions or concerns you may have along the way. Please feel free to contact me anytime if you need assistance or guidance.

Thank you for choosing me as your mortgage broker. I look forward to working with you and helping you achieve your homeownership goals.