The Dos and Don'ts
of Applying for a Mortgage
Purchasing a home is a major life decision. Your home is where you'll plant your roots and make memories that last a lifetime. To get you started, we've put together a list of Dos and Don'ts to guide you through the mortgage application process.
DON’T: Change Jobs
Lenders will usually ask mortgage applicants to provide a job history that includes details from their previous two years (24 months) of work. The more jobs an applicant has worked over that period, the riskier they may appear to the lender. Banks understand that people switch jobs for various reasons, but they also know that when a change of jobs occurs, a change of income usually takes place with it. Your job history and income stability will play a major role in your mortgage approval or denial. Therefore, consider the impact that changing jobs will have on your mortgage application. And refrain from making changes to your hours worked or pay structure if at all possible, with the exception of normal pay raises, of course.
DO: Continue making your current mortgage or rent payments
Purchasing a new home is exciting and it can be easy to forget about the home or apartment you may be leaving. Don’t forget to continue paying your monthly bills at your current residence, including rent, utilities, etc. Lenders check your payment history when evaluating your mortgage application and will want to see consistent payments to demonstrate reliability. Missed payments just prior to (or during) the application process will reflect negatively and hinder your chances for approval.
DON’T: Make any major purchases (car, furniture, jewelry, etc)
Lending companies will comb through your finances to ensure you will be able to repay the money that is loaned to you. This review process includes taking a look at any debt you currently have. When you make a major purchase on credit, such as for a new car or furniture, you may end up altering your monthly debt-to-income ratio. This in turn affects the amount of money you qualify for. Abstaining from large purchases during the home buying process is the best way to avoid any issues.
DO: Continue to use your credit as normal
Although making large purchases may deter banks, don’t shy away from using your credit entirely. It can be a knee-jerk reaction for people to close credit cards and swear off using credit altogether. In fact, closing credit accounts can negatively impact your credit and in turn your mortgage approval. However, banks love consistency, and continuing normal patterns of credit use gives banks a better picture of your spending habits. Moreover, it can continue to help your overall credit score.
DON’T: Change bank accounts
Switching bank accounts can slow down the mortgage process. Banks will traditionally ask for 3-6 months worth of account statements to check on your financial history. Changing bank accounts often means you can no longer access your older information, as you are no longer a member of the bank. Additional time and money is then needed to contact the bank and request duplicate information for the lending company. This can slow down the application process and may cause you to miss out on the purchase of the home.
DO: Communicate with your lender and ask questions
A lot goes into every mortgage application and we want to make sure that you are ready for anything. If you have questions about any of the Dos and Don’ts on the list, don’t hesitate to ask. As the old adage goes, there is no such thing as a stupid question. You should be as informed as you possibly can be before that big day. If you have anything arise during the mortgage process that affects any of the areas we have addressed above, be sure to communicate these changes with your lender to understand how it may affect your loan qualification.
You’ve got your eyes on a new home. Let us help you through the process!