Congratulations – you are under contact for a new home!
Between the times you receive mortgage pre-approval and your new home closing, keeping your finances in order is an important task. Your mortgage pre-approval is based on many factors including your credit score, current debts, and income.
Something that may seem inconsequential to you could have an impact on your mortgage approval, and the last thing anyone wants is your dream to fall apart because of a simple misstep. With that in mind, here are some key things to remember…
The Do’s
Do: Have all your required documentation in place and keep your records in good order. I will able to provide you with advice and let you know what documentation will be required. Be prepared to document as much of your income as possible, and make sure you can provide pay stubs and possibly tax returns.
Do: Pay your bills on time. Make sure you are making your all of your liability payments on time. Late payments can show up on your credit report and affect your credit score and put the closing in jeopardy.
Do: Line up a homeowner’s insurance policy early, especially in California. Sometimes fire insurance may be needed and it can take some time to shop for the right policy. A policy must be ready to go prior to issuing the Closing Disclosure.
Do: Pay off debt, or keep it paid down. This will put you in a better financial position, and help with your debt-to-income ratios (part of your mortgage approval). We will let you know if debt absolutely must to be paid down.
The Don’ts
Don’t: Change jobs without notifying me. Changing jobs at any point during the home buying process can be risky. Changes to your income can make it more difficult for you to qualify for a loan and a new job may mean a change in pay structure; for example, you may go from a salaried position to something less stable, such as a commission-based job.
Don’t: Wait to liquidate funds from stock or retirement account. If you need to sell investments, do it now and document the transaction. Don’t take the risk that the market could move against you leaving you short of funds to close
Don’t: Apply for new credit cards. Your credit score is an important factor that lenders consider when qualifying you for a mortgage loan. Applying for a credit card can affect your credit score, especially if you frequently open and close credit accounts.
Don’t: Make any major purchases. Although you might be tempted to go out and spend a lot of money on home furnishings and appliances for your new place, but it’s important to wait until you close on your mortgage loan. You will want to keep your credit cards paid off, or at least to keep your balances where they were when you applied, to avoid negative effects on your credit score.
Don’t: Enter any deferred payment plans. This is a popular option when purchasing furniture, but just say no. Even if the payments won’t start until six months down the road, they will show on your credit report as debt and affect your debt-to-income ratio, your credit score, and impact your qualification.
Don’t: Close any revolving credit accounts, even if they have a $0 balance. This could negatively affect your credit score as it will change your percentage of available credit, credit history, mix of credit and account payment history.
The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.
