7 Things to Avoid After Applying for a Mortgage – “Congratulations, you were pre-approved for your mortgage!” This exciting message likely comes with a sigh of relief, and allows you to enter escrow on that home you are thrilled to buy. There are a few things you should avoid doing during this period of time, to make sure you maintain your approval status until closing.
Things to Avoid After Applying for your mortgage to avoid annoying, or devastating, changes to your approval status.
7 Things to Avoid After Applying for a Mortgage
1. Depositing large sums of cash
More money in your account is always a good thing, right? Not necessarily. Your underwriters need to be able to track your assets, and a large cash deposit is not traceable. If you have a large sum of cash or a personal check to deposit, talk with your loan officer first to determine the best way to go about this process without affecting your mortgage application status.
2. Cosigning a loan for someone else
If you have excellent credit, you may be sought after by family members or friends for support in their own financial endeavors as a co-signer. Avoid cosigning for anyone until you have closed on your own loan, as doing so will likely alter your own approval status or the terms of your loan.
3. Making a large purchase
As you prepare to move into your new home, you may be considering some large purchases. Perhaps new furniture, appliances, or TVs are on the list, or maybe it just so happens to be time to get a new vehicle.
Avoid making any of these purchases until closing if possible. These large purchases can affect your mortgage approval status in two ways: if you buy with a loan or payment plan then both your credit score and debt-to-income ratio will be affected, and if you buy in cash your assets will be depleted. Unless absolutely necessary, avoid making any large purchases until after closing.
More: 7 Common Mistakes to Refinancing
4. Closing credit accounts
It is a common misconception that Closing Credit Accounts will make you look less risky as a borrower. However, closing credit accounts actually lowers your credit score and can interfere with your mortgage approval process. In general, it is best for your credit score to keep credit accounts open with a zero balance rather than closing them.
5. Applying for new credit accounts
Opening new credit accounts can change your credit score, which may result in a change to your approval status or your interest rate. Delay opening any accounts until after closing.
Related: What to know about home buying power
6. Switching bank accounts
Avoid switching bank accounts until after you have received final approval and closed on your mortgage. Your mortgage underwriters need to be able to source and track your assets, which will be much simpler without switching accounts in the middle of the process.
7. Changing jobs
Of course, there may be some cases in which changing jobs during the mortgage application process is out of your control. However, if you have any control over the timeline, wait to transition into a new position until after you have closed on the mortgage. If your employment status changes (even if it means your financial position becomes stronger), your application process will have to start all over and it is almost certain you will experience delays in the escrow process.
To talk with a pro about applying for a mortgage or how to prepare for homeownership, contact us any time!
