The Top 5 Do’s & Don’ts While Your Home Loan is in Process

If you’ve turned in a mortgage application, congratulations! You’re one step closer to purchasing your next home. Before your loan gets a stamp of approval, your finances will be under review to make sure you’re a qualified borrower.

During this time, you want to avoid making any last-minute financial decisions that could have an adverse effect on your application. Here are five do’s and don’ts you should follow that will help you minimize delays during loan processing and improve your chances of making it to closing:


Do: Stay close to the phone and check email regularly.

Your mortgage lender may need to contact you to verify information, ask questions, or request additional documents during loan processing. Make an extra effort to answer and return these calls promptly. Check your email often and respond to requests quickly to do your part in expediting the process.


Don’t: Make sudden changes to your credit profile.

Closing old accounts, opening new accounts, consolidating debt, and other actions that can alter your credit history should wait until after loan closing.

Even actions you think may improve your credit profile can have a negative impact. For example, paying off debt may actually dock your credit score a few points. Play it safe and limit credit related financial activity during this time unless advised by your lender.


Do: Hold off on other major purchases.

Making large purchases while your home loan is in process can hurt you in two ways. Taking on new debt can increase your debt-to-income ratio and paying for a large purchase in cash can decrease your assets.

In both scenarios, the major purchase may alter what’s on your loan application. Remember, your finances are held under a microscope until closing so put other spending on the back burner.


Don’t: Switch employers.

Try to avoid making career changes. During loan processing, the information you put on your application is verified including your income and employer. Switching employers can prolong this verification process.

In addition, a long working history with one employer is generally more attractive to a mortgage lender. Changing positions right before a home purchase shortens your tenure. If possible, wait to make career moves until after closing especially if you’re considering self-employment.


Do: Make on-time payments and maintain low credit card balances.

Keeping up with your regular credit card payments should be a given, but it’s still worth mentioning. You should also avoid significantly increasing your credit card balances. Reach out to your lender if an emergency occurs where you need to rely on your credit lines.

In summary, to minimize problems during loan processing, keep changes to your finances at a bare minimum, submit documents promptly, and stay in touch with your lender. If a situation arises where a change in your financial standing is unavoidable, notify your lender right away.

 

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