Living Quarters

Things to Avoid During the Mortgage Loan Process

June 22, 2023

Here are some important reminders to expedite a successful home closing!

It’s essential to be aware of certain actions and events that can potentially impact your loan approval. In this Bank Five Nine Mortgage blog post, we’ll discuss some important reminders to help expedite a successful home closing.

Large Purchases:

Making significant purchases before closing on a home can have a direct impact on your loan approval. Lenders analyze your debt-to-income ratio and acquiring new debt can alter that. It’s advisable to avoid major purchases, such as buying a car or big furniture, until after the closing to maintain a stable financial profile.

Remember, once the closing is complete and you have secured your mortgage, you can then consider making those large purchases without affecting the loan process. At that point, as a bonus, you will have a better understanding of your overall financial commitments!

Major Life Changes:

  • New Job: Lenders review your income and job history to evaluate your ability to make consistent mortgage payments. An unexpected job change without notification may create uncertainty, potentially affecting your loan approval. Talk with your Bank Five Nine lender before accepting a new job to ensure it aligns with their requirements for the loan you are looking to get, and to provide them with accurate employment information.
  • Change in Marital Status: Changes in marital status, such as getting married or divorced, can impact your mortgage application. Lenders typically evaluate the combined income and financial stability of married couples. In the case of divorce, the division of assets and potential financial obligations may affect your qualification for the loan. It’s essential to inform your Bank Five Nine lender about any changes in marital status and provide updated documentation to ensure accurate evaluation of your financial situation.
  • Long Vacation: Planning a long vacation, particularly if it overlaps with the home buying process, can potentially raise concerns for lenders.  It’s advisable to discuss your vacation plans with your lender in advance and ensure that all necessary documentation and communication can still be facilitated during your absence.

    Lenders evaluate your employment stability and financial circumstances, and sudden changes can raise concerns. It’s crucial to inform your lender of any major life changes to ensure they have accurate and up-to-date information.

New Credit:

Opening new lines of credit or obtaining additional loans during the home buying process can raise red flags for lenders. Each new credit application generates a hard inquiry on your credit report, potentially lowering your credit score. It’s best to refrain from applying for new credit until after your home purchase has been successfully closed.

Random Deposits (Especially in Cash):

Depositing large sums of money into your bank account, especially in cash, without a clear source or explanation can be viewed as suspicious by lenders. Transparency is key in the mortgage process! When you make a large deposit, whether in cash or through other means, it’s important to provide proper documentation to your lender. This includes evidence of where the funds originated from, such as paycheck stubs, bank statements, or gift letters if the money is a gift from a family member. By providing clear documentation, you demonstrate the legitimacy of the funds and help alleviate any concerns your lender may have.

In some cases, you may encounter a situation where you receive a significant amount of money that is out of the ordinary. This could be from the sale of an asset, inheritance, or a one-time financial event. It’s crucial to communicate with your lender about these unusual deposits and provide a detailed explanation.

Maintaining Clear Financial Records:

Throughout the mortgage process, it’s essential to maintain clear and organized financial records. This includes keeping copies of bank statements, deposit slips, and any other relevant documents. By having well-documented records, you can easily provide the necessary information when requested by your lender. It also helps you stay on top of your finances and ensures accuracy in your mortgage application.

Late Payments:

Even after your credit has been initially pulled, it’s essential to continue making all your payments on time. Late payments can negatively impact your credit score and raise concerns for lenders. Consistent and timely payments demonstrate financial responsibility and can contribute to a smooth closing process.

Throughout the home buying process, maintaining open communication with your lender is crucial. If you have any questions or concerns about specific actions or events that may impact your closing, it’s important to reach out and seek clarification. Your lender can provide guidance and help you navigate potential obstacles. By staying informed and proactive, you can increase the likelihood of a smooth closing and fulfill your dream of becoming a homeowner. Remember, your Bank Five Nine lender is there to support you, so don’t hesitate to reach out with any questions or concerns along the way!

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