When you’ve finally put down an offer, and the homeowner accepted it, it’s normal to still feel anxious, especially when you’re buying the house with a mortgage. Part of your lender’s standard operating procedure is to visit and appraise the property before they decide whether or not to grant you a loan. In some cases where the resulting appraisal value is lower than what you proposed on the loan application, they can still give you a loan but with a lower value as well.
Apart from the appraisal, your lender will also evaluate your income, credit history, and your financial management capacity. This is because they want you to guarantee that you’ll be able to pay them back without any delays. So, the best thing you can do while waiting for your lender to make a decision is to avoid moving any of your finances and credit as much as possible.
Particularly, these are what we recommend you abstain for now:
Apply for New Credit
Applying for a new credit aside from your mortgage loan will mean that you’ll have additional things to pay for — a situation that will not look good to lenders. Remember that your credit information is accessible to lenders everywhere. Even if you applied for new credit after you give them your details, they will know that you applied for a separate one.
Use Up More Credit
Second, refrain from using your credit too much for now. Your total credit payable will reflect on your credit report affecting the lenders calculations. Supposing your income is $6,000/month, your total monthly expense is $3,000, and your running credit balance is $1,950. That means you only have $1,050 to pay for your mortgage and other emergency expenses. Now imagine if you continue using up more credit, that would reduce your extra money even more — not great!
Move Money So Much
Are you that person who has plenty of bank or investment accounts and you’ve gotten used to moving money around these accounts so much? While it’s normal and legal to transfer your personal money constantly, this might be a ground for suspicion for lenders, especially when you’re moving big amounts of money.
Money laundering has been widespread, and despite the measures taken by the government and concerned institutions for years, it still continues even today. So, to avoid delays in your application, make it easy for your lenders to trace your files and evaluate your situation.
Quitting Your Livelihood / Switch Jobs
Unless you own a blue-chip company with proven stability, we suggest you don’t make rash decisions that could lose you your income. If you have submitted your application, remember that you were required to disclose your income and its sources. It is the lender’s job to verify or cross-check all the information you reported. If you left your job or closed your business, they will know for sure. That means, the income value you disclosed will no longer be considered in their assessment.
Close Old Credit Accounts
You might be wondering how can this affect your application. Wouldn’t this mean that you know no longer have debts to pay and can allocate more for your mortgage already? Well, that is correct at a certain point. But know that there’s what is called your “credit score”.
Closing old credit accounts will affect the 4th factor, types of active credit, which is 10% of the credit score. If you have plenty of credit accounts with only minimal to no payment delinquency, this will tell your lenders how well you can manage credit. So, even if you’re not utilizing any of your credit accounts as much anymore, keep it — at least until your mortgage is approved.
Buy/Lease Anything Else That’s Expensive
Lenders will also look at how much money you have in the bank. Basically, the more extra money you have, the better. Simply speaking, refrain from withdrawing a large sum of money for now. Delay your purchases as much as you can, especially if they’re unnecessary.
Avoid Deferred Loans
Loans can be officially deferred as long your lender approves of it. Deferred loans are loans that are typically repaid at a later date with or without additional interest/charges. Deferred loans will not look good to your mortgage lender also because it simply means you’ll have additional stuff to pay once they approve your mortgage.
All these may seem a lot to remember, but the bottom line here is that you simply need to rest for a while from your financial activities (except continue paying your existing loans on time, of course!). Be conservative about your financial decisions while you wait for your deal to close, and you may even find it a refreshing part in your financial journey — mortgage aside.
If you’re still looking for a real estate professional who can help you buy your dream house and guide you through the process step-by-step, call us at HomeSold GA! We’re available at 770-668-4888.