Congratulations! You filled out your loan application...
with a lender and you are under contract on your dream home! You are handing the keys over to the mortgage company and keeping your fingers crossed that your loan will go through. Maybe, you aren’t worried in the slightest because you know that you have a stellar credit score, money in the bank, and everything seems to be going smoothly. On the other hand, that little voice inside your head is persistently egging at you, telling you the loan isn’t going to go through because of x, y, and/or z. Either way, we want to make sure you feel 100% confident when applying for a mortgage loan at any point in your life.
As a lender, we take your documents and push the loan through the process as soon as possible. Typically, we get everything ready with time to spare and you are looking good on your clear to close. THEN you decide to open a new Target Red Card (come on, have you ever met anyone that does NOT enjoy shopping at Target?), one week before we are closing on your home… OR you deposit all of your mattress money into your bank account because you’re getting ready to buy some pinterest-worthy furniture for your new digs. You didn’t want to put it on a credit card or make a large purchase before closing, right?
STOP RIGHT THERE! We have got to get you prepared, otherwise that home that you have invested Earnest Money into, may disappear. This is not an exaggeration. We have borrowers tank their loan in minutes.
Let’s make sure we set you up for success and get you that dream home!
Not sure where to start? Have more questions? Find a Loan Officer and ask them anything!
Here are 5 Credit Mistakes to Avoid During the Loan Process
We may pull your credit report at closing, and if your credit scores have dropped, you may no longer qualify for the rate that was underwritten and the final approval may come back with a higher rate. You may have to start the process over again depending on how badly you have damaged your credit.
1. DON’T APPLY FOR NEW CREDIT OF ANY KIND.
We talked about this previously, but let me stress that unless you are given specific instructions to do so, it is best to avoid any attempts at obtaining new credit. This includes “Pre-Approved” offers that you have received in the mail, or at a department store that offers a discount for applying for their store card. When your credit is pulled by a potential creditor or lender, you can lose points from your credit score immediately, so best to just hold off for now.
2. DON’T CLOSE CREDIT CARD ACCOUNTS.
Hold off on closing credit card accounts until after close. If you do close an account, it can impact your credit score in a number of different ways, such as decreasing your “available” credit, thus increasing your balance/limit or utilization percentage. It can also affect the length of credit history factor.
3. DON’T MAX OUT OR INCREASE THE BALANCE ON ANY OF YOUR CREDIT CARD ACCOUNTS.
We know that it’s tempting to order those new Lay-Z-boys for your man cave, but please refrain! It’s a tragic mistake. Increasing credit card balances, is one of the fastest ways to bring your scores down and can impact as much as 50-100 points immediately.
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4. DON’T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM.
The small things matter here. Avoid adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the loan process, the better. Don’t give them a reason to reevaluate your application.
5. AVOID DEPOSITING CASH
in your bank accounts. Remember that mattress money? Keep it where it is because if you deposit it, the lending guidelines require us to document where it came from. I know this seems counterproductive right? In this case, it’s true; more money more problems. Trust us on this one.
If you have any questions feel free to give us a call. Let’s make sure we protect your credit score while we are securing your home loan! Being proactive with your credit can make financing a home a simpler and faster process. We want to help you get into a home!