Welcome to the home loan approval process! Now, there may be 60 days between the application date and the closing date, so it's important for applicants to remember that mortgage approvals can be revoked at any time prior to funding.
As mortgage applicants, there are many events that are out of your control – job security and health matters, for example. But there are also events that are within your control. Knowing that mortgage approvals can be fragile, here are 10 things you should absolutely not do while your home loan is in process. It may be the difference between being approved by the bank and being turned down.
Thou shalt not change jobs, become self-employed or quit your job. Changing jobs will result in a delay of your settlement because the underwriters will need to completely re-underwrite your file, and you will need to provide at least 30 days of pay stubs. Even if you switch to a better-paying job, be sure to consult your loan officer prior to changing your employment.
If you do not consult your loan officer, we will find out when the lender calls your employer the day before settlement to verify your employment. Also, if you are applying for a USDA loan, keep the income limits in mind. If you switch to a better-paying job, you might put yourself over the income limit and no longer be eligible. And most importantly, do not switch from salaried employment to commissioned employment. If you do, don't plan on applying for a mortgage for another two years.
- Thou shalt not buy a car, truck, van or boat (or you may be living in it)!
- Thou shalt not use credit cards excessively or let your accounts fall behind.
- Thou shalt not spend money you have set aside for closing.
- Thou shalt not pay off any collections, unless it is a condition of the loan. By doing so, the old collection becomes new again, even though it's now paid off, and will negatively impact your credit score.
- Thou shalt not buy furniture. Wait until you are in your home, and then you can buy anything you want.
- Thou shalt not originate any inquiries into your credit. The lender will see this and assume you are applying for new credit.
- Thou shalt not make large deposits without first checking with your loan officer. This may cause the lender to think you are being loaned money, which would then create a new liability for you.
- Thou shalt not change bank accounts.
- Thou shalt not co-sign a loan for anyone.
Any one of these things could significantly impact your credit score and/or loan approval. We check your credit scores in the beginning of the process, and the lender will check them at least one more time before settlement. They will also verify your employment and assets only a few days before settlement.
Mortgage lending is full of "gotchas," and with underwriting times stretching to 45-60 days, it's a lot more likely that a mortgage applicant will trip into one. Following these 10 rules, though, is a good start.
Andrea D. Moore is a licensed mortgage loan officer with The Mortgage Market of Delaware. To reach Moore, call 302-228-3130 or email MMODAndrea@gmail.com.