To build on yesterday's post Buying a Home Zero Down Doesn't Mean Free here are the Do's and Don'ts for a smooth home loan approval. A common theme is 'as long as the money is in the bank who cares?'. In this day and age risk management is priority, evaluation of funds makes sure those funds are not from terrorist organizations, and people have the debt-to-income ratios that makes sense.
I also hear 'but I will make my payment' when discussing qualification. How do underwriters know a person will make their payments and not default? Are underwriters just supposed to trust people's word that they'll not default? Did you know that the loan officers and lending companies get penalized when a borrower is foreclosed upon?
The massive foreclosure problem of 2007 has underwriters scrutinizing borrower's finances and having the money in the bank just isn't good enough.
The Do's and Don'ts for a Smooth Loan Approval
- Do call us if you have any questions
- Do continue living at your current residence
- Do continue making your mortgage or rental payments
- Do continue to use your credit as normal
- Do keep working at your current employer
- Do stay current on all existing accounts
- Do keep paying all debts on time
- Do continue to save money
- Don't apply for new credit (even if you seem pre-approved)
- Don't buy furniture, appliances, or entertainment systems
- Don't change bank accounts
- Don't close any credit card accounts
- Don't consolidate your debt onto 1 or 2 credit cards
- Don't finance any elective medical procedures
- Don;t join a new fitness club
- Don't make a major change purchase (car, boat, fur coat, jewelry, etc)
- Don't max out or over charge on your credit card accounts
- Don't open a new cell phone account
- Don;t open a new credit card
- Don't pay off any loans or credit cards without discussing it with us
- Don't pay off collections without discussing it with us
- Don't start any home improvement projects
- Don't take out a new loan
- Don't transfer any balances from one account to another
These Do's and Don'ts may sound like a 'given' but surprisingly they happen all the time. Doing and not doing these can drastically change a borrower's ability to qualify
It never hurts to ask questions; so please ask the person you've chosen as they are invaluable resource during the pre-approval process.