Because the lending standards are getting tighter by the day, there are some things that you need to know to stay on the good side of your loan underwriter. Although the three things that you are warned about here, there are several other actions that you should avoid.
1. Getting a new credit card or auto loan. In fact, you don’t actually have to get a new car or credit card, you could be declined for the loan just by applying.
How would they know? Many lenders are running credit reports just days before closing to look for a change in circumstances. This could be all it takes to ruin your chances of getting your next home.
2. Charging up your credit cards. Sure, it sounds like a great idea to buy your new furniture and appliances so they will be ready to move in when you close, but using credit to do it could leave you with a lot of stuff and no place to put it.
The reason is that your credit card payments are calculated into your debt-to-income ratio and increased payments could put you over the limit. Also keep in mind that your credit score can be affected by the balance versus credit limit ratio on your cards. Exceed 20% and your credit scores will suffer.
Waiting until just after closing before charging up your cards is really your best bet.
3. Changing jobs. Your mortgage approval may be based on the fact that you have a stable employment history and the income that it generates. Changing jobs, especially to one in a different field where you don’t have a proven history, could jeopardize your chances of getting your mortgage.
One of the most perilous things that you could do would be to either quit your job, get fired,or even decide to go to work for yourself and change the way you are paid. Going from a W2 job to being self employed may require 2 years of complete personal and business tax returns to document your income.
Think that having a lot of business deductions to decrease your tax liability is a good thing? It may be, but you will also have to qualify with your net income AFTER deductions.
If you are considering buying, refinancing, or even selling (you do want to be able to buy your new home after you sell the current one, right?), give me a call at 219-779-7334 or email me here. I’ll make sure you are on the right track to get your mortgage at the best possible rate and the least possible headaches!
Scott
Your Indiana mortgage expert specializing in FHA, VA, and USDA Rural Development loans.