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6 Don’ts After You Apply For A Mortgage

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I learned a long time ago that “common sense is NOT common practice". This is especially the case during the emotional time that surrounds buying a home, when people tend to do some non-commonsensical things. Here are a few that I've seen over the years that have delayed (and even killed) deals:

  1. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift in cash is not. Discuss the proper way to track your assets with your loan officer.
  2. Don’t make any large purchases like a new car or a bunch of new furniture. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios...higher ratios make for riskier loans...and sometimes qualified borrowers are no longer qualifying.
  3. Don’t co-sign other loans for anyone. When you co-sign, you are obligated. With that obligation comes higher ratios, as well. Even if you swear you won’t be making the payments, the lender will be counting the payment against you.
  4. Don't change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is a consistency of accounts. Frankly, before you even transfer money between accounts, talk to 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 affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
  6. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more approvable. Wrong. A major component of your score is your length and depth 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 those determinants of your score.

The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. Any blip in income, assets, or credit should be reviewed and executed in a way to keep your application in the most positive light.


About Dean Hartman

Dean Hartman is a 25-year veteran of the mortgage banking industry. He has achieved the designation of Certified Mortgage Planning Specialist (CMPS), and also specializes in sales leadership, seminar presenting, and team building.

11 Responses to “6 Don’ts After You Apply For A Mortgage”

  1. Rpace April 12, 2012 at 9:26 am # Reply

    I personally have been affected by #1 and #2. The large cash amount did not kill the deal but delayed it way too long and the Tension was Hell. I had a buyer purchase both a new car and new living room furniture (for the condo she didn’t get) Deal Died and buyer dissappeared and the listing agent wasn’t happy with me no matter how I explained the buyer was not guided by her loan officer:( So I always remind my buyers and other agents when they bring me a buyer

  2. Carol Clapp April 12, 2012 at 9:41 am # Reply

    Great article.  I would like to share this with all my buyers… they so often forget what being mortgage smart.

    • KCMcrew April 13, 2012 at 10:42 am # Reply

      Thanks Carol, share away!

  3. Tammy Benkwitt April 12, 2012 at 12:05 pm # Reply

    Excellent article, thanks!

    • KCMcrew April 13, 2012 at 10:42 am # Reply

      No problem, thanks for taking the time out of your busy day to read our blog.

  4. Patwysocki April 12, 2012 at 12:53 pm # Reply

    Oh so true, my mantra with Buyers.

  5. Terry_kelly April 12, 2012 at 4:46 pm # Reply

    Way back when I was a loan processor, the number of prospective borrowers who bought cars and furniture, etc.,before their loan closed was unbelievable! It happened so often I thought maybe it was contagious.

  6. Mortgages By Mark April 13, 2012 at 3:06 pm # Reply

    The other thing I would add is don’t start any construction projects after applying! That can cause some issues with the appraisal.

  7. Rick Lemmons April 14, 2012 at 5:56 am # Reply

    Good article. I tell my buyer’s that buying a house won’t stop you from buying a new car but buying a new car will stop you from buying a house.

  8. Dru April 14, 2012 at 11:14 am # Reply

    Thanks, this is right on time. Just yesterday I advised a first time buyer on #2, I’m sharing this with her and passing it on to others. 

  9. Steve Herndon May 7, 2012 at 1:59 pm # Reply

    Nailed it!

    Sage advise!

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