Congratulations, you’re almost there in getting your own home. You have got your mortgage pre-approval and have begun house hunting. However, bear in mind that you still have a long way to go in getting the mortgage. Certain actions can cost you dearly after your approval. Avoid these mistakes while closing on a mortgage that could hurt your chances of getting your dream home.
Avoid new debt
Taking on loans or getting a new credit card before closing on a mortgage is a potential deal-breaker. Your DTI ratio is one of the essential factors in your mortgage approval. Any increase in your debt could likely result in you getting turned down for a mortgage. Your lender will undergo a credit check at the last minute to see if you have racked up any new debts, so don’t risk getting the new credit card you wished for. Moreover, always remember that even opening a credit card or account without using it can also affect your credit. Hence it is wise to put off everything until you officially get your mortgage.
Don’t co-sign a Loan
Many people assume is that co-signing another loan will not impact your credit. This is wrong, as it is considered as a debt for both signers and will reduce your chances of mortgage approval significantly. For example, even if you give a mortgage lender 12 months of canceled cheques showing that the co-signer is paying the debt, the payments on a newer loan will be calculated as part of your debt-to-income ratio
Maintain your Cash Reserves
Paying off all your debts can affect your approval as well. It affects your cash reserves, which you might have saved for your deposit. Consequently, it will impact the type of loan and interest rate you will get. It is always advisable to consult with your lender or mortgage broker before doing anything. Moreover, the lender will also want to know as to where the money came from to pay off the debt.
Don’t Change your Bank
Are you thinking about changing your banks? You will want to rethink if you are in the middle of mortgage approval. Lenders like to see a consistent approach in your financial dealings, and they prefer to see consistent bank statements.
Deposits all over the place
It is always beneficial to stay on top of your cash dealings. Any large amounts of deposits in your bank would require detailed explanations as your lender will require you to provide evidence of unusual deposits in your account. Joel Gurman, a mortgage industry expert says, “Make sure you document everything,” “Be proactive and contact your lender if you receive a bonus or if you’re cashing in your CDs to consolidate your assets. A good lender can advise you on what you’ll need for a paper trail.”
Don’t Ignore Your Lender
Finally, if you want a smooth and hassle-free lending process it is important to be in constant communication with your lender. Respond to timely requests and provide all documents upfront to avoid unnecessary delays. At Texas Trust Home Loans our loan processing team will be in constant communication with you through the loan process and keep you updated every step of the way.
Pay attention and avoid these mistakes when closing on a mortgage. Always think before acting in this crucial time as a single mishap can take away your homeownership dream from you. Ready to take the first step towards purchasing your dream home? Our expert loan officers are ready to help you out. For further information, please visit our website www.texastrustloans.com