So you’ve applied for a home loan and your lender gave you the green light,
And now you and your Realtor® are out home shopping for the perfect home. You may think that buying a new car or purchasing some new furniture in anticipation of moving into the new home would be ok, but is it? The answer is NO! We are here to help you put the pause button on your spending and save your credit so that you can close on your new home without any financial hiccups to your credit and loan status.
1. Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender. Lenders need to source your money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
2. Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home. New debt comes with new monthly obligations. New obligations create new qualifications. People with new debt have higher debt-to-income ratios. Higher ratios make for riskier loans, and then sometimes qualified borrowers no longer qualify.
3. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you’re obligated. With that obligation comes higher ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.
4. Don’t Change Bank Accounts. Remember, lenders need to source and track your assets. That task is significantly easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.
5. Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be impacted. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
6. Don’t Close Any Credit Accounts. Many buyers believe having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants of your score.
Make sure you communicate with your Realtor® and lender about any new or large purchases that may affect your credit score, loan status and cash reserves. This is an important process and transaction. Any little hiccup along the way could and might affect your ability to complete the home buying process or delay it significantly. Talk about it first and then let us help you make the best decision to protect your home buying process.
We are always here to help. Have more questions or
want more information? Call us or email us.
751 E. 36th Avenue, Suite 104 Anchorage Alaska