7 Critical Things to Avoid During the Loan Process
By james on September 15, 2010
Our new credit environment is fast becoming one of extremely rigid guidelines. Your ability to obtain a mortgage is dependent on the financial scenario presented in the loan application. Think of this application as a snapshot of your existing circumstance. If there are any material changes to this picture, it can mean the difference between having a loan approved, and having it declined.
Certain things are verified and then re-verified at different points in the process, and here is a list of common bugaboo's that uninformed mortgage borrowers can sometimes find themselves in.
- Do not stop paying your current mortgage: Your credit can be re-examined prior to funding, and a late payment can disqualify a borrower from getting funded.
- Do not pay down or pay off any debts: Let us advise you if it is necessary to pay down or pay off debts in order to qualify. Sometimes paying off old collections can drastically lower your credit score, or impact your borrowing profile in counter-intuitive ways.
- Avoid multiple credit inquiries: Multiple credit inquiries will have to be explained by the borrower in writing, and can sometimes negatively affect your credit rating. Watch out for certain purchases such as mobile phone plans or gym memberships, as these can sometimes result in an unintended inquiries. With regard to shopping for your mortgage and talking to different lenders, you can actually have unlimited credit inquiries during any two-week period and this will NOT have any adverse affect.
- Do not incur new debt: Buying a new car or making other expensive purchases during the loan process can change your credit worthiness. New debts will directly impact that critical "debt to income ratio", which governs how much money can be borrowed. Wait until after funding, there, tiger!
- Do not change jobs or quit your job: Your approval is based not only on income, but also on employment stability. Try to delay any of these types of changes until post loan funding.
- Do not change banks: Do not switch to a new bank during the loan process. This will create a ton of additional paperwork and special verification for you.
- Do not remodel your home: In a refinance, one of the parts of your "approval snapshot" is the real estate being used to secure the funding. If the property is in any state of dis-repair, that is a likely deal breaker for the loan approval.
Lots of these things are un-avoidable, but if you know what to watch out for, it can make your life and your loan process easier to deal with. Problems with a mortgage approval are practically inevitable, but my job at Portland Home Loan is to minimize these problems for you at every turn.