As your Personal Advisors, we view our role very much like that of a coach. A major responsibility of any coach is to come up with a game plan that puts the team in the best position possible for success. As the team successfully carries out the game plan the end result is victory.
Part of our game plan for you as your coach is to make sure you understand six “deadly” or potentially detrimental “sins” when obtaining a mortgage. If you follow these recommendations then our end result will be a successful closing that is smooth and predictable.
It is important that your financial picture does not change from the beginning of the loan to the end (unless it is positive, of course). Make sure you steer clear of the following:
1. Major Purchases. Sometimes people will buy a car, for instance, soon after getting approved for a mortgage. However, an unexpected increase in your Debt To Income (DTI) ratio reduces the amount of monthly income available for your mortgage payment. The lender may then decide you cannot afford the home. Also keep in mind that using cash for a purchase can be a problem too, since lenders consider cash reserves when approving a loan.
2. New Lines of Credit. Any sort of new charge card, whether a credit card or gas card, can negatively impact your DTI and/or credit scores. Wait until after you have closed to buy things like major purchases for sound systems or furniture sets.
3. Maxing Out or Closing Current Lines of Credit. Keep purchases on any open lines of credit to a minimum. If you have any lines that you have had and do not have a balance, do not close them. Either scenario can negatively impact your credit profile.
4. Changing Jobs and/or Income. Changing or quitting your current job or line of work can severely impact the loan approval. Additionally, any dramatic changes in your income could jeopardize your loan approval as well. Certain loan programs have income limitations. So even if you are getting a raise or promotion this could actually negatively impact the loan. There are many factors to this for a lender, so the best bet is to not make any possible changes until after the loan closes.
5. Neglecting or Missing Any Payments. Make sure all your debt payments are made on time, or at least so they would not be 30 days past the due date. You probably are thinking to yourself, “Duh!” But you would be surprised.
6. Changing Your Assets. Loan approvals are often directly impacted negatively or positively based on the amount of assets or cash reserves you may have in your accounts. As much is possible, do not make changes to these accounts during the loan process.