The Big Don’ts When Applying For A Mortgage
Do not apply for new credit of any kind
If you receive invitations to apply for new credit, do not respond. If you do, that company will pull your credit report and this will have an adverse effect on your credit score. Likewise, don’t establish new lines of credit for furniture, appliances, computers, etc.
Do not pay off collections or charge-offs
Do not pay these off unless your mortgage company specifically asks you to in order to secure the loan. Generally, paying off old collection accounts causes a drop in the credit score.
Do not max out or over charge existing credit cards
Running up your credit cards is the fastest way to bring your score down and it could drop up to 100 points overnight. Once you are engaged in the loan process, keeping your credit cards below 30% of the available limit is important.
Do not close credit card accounts
If you pay off and close out a credit card account, it can affect your ratio of debt to available credit, which has a 30% impact on your credit score. If you have the available funds to close out an account, wait until after you close on your mortgage loan.
Do not raise unnecessary red flags
Co-signing on another person’s loan or changing your name and address during the application process may require you to provide additional documentation to support your qualification for your loan.
Do not make any adjustments or transfers in your asset profile
Do not change investments, move positions, close accounts, open new accounts, or substantially change your asset profile.
Do not make large unexplainable deposits into bank accounts
Deposit amounts exceeding past history and employment compensation will be questioned by an underwriter and will require documentation supporting the source.
Do not make changes in your employment or income
Employment stability is a large factor in the underwriting loan process.