10 Buyer Commandments When Applying for a Mortgage

Recently I’ve had a few clients declined for mortgages over silly things – one missed a $25 bill, and his credit score dropped over 50 points, putting him out of lender guidelines for approval.  Another made a large purchase with cash which caused his debt to income ratio to become unfavorable in the eyes of the underwriter of the loan.  If only they’d known the 10 Commandments of what thou shalt not do when applying for (or if you will be soon) a mortgage.

10 Commandments for Buyers:

1. Don’t buy or lease a new car or you may find yourself living in it!
2. Don’t quit your job to change industries or start a new company.
3. Don’t switch from a salaried job to a heavily-commissioned job or 1099 independent contractor position.
4. Don’t transfer large sums of money between bank accounts. If you need to do so, check with your loan officer to ensure what kind of documentation will be required BEFORE you make the transfer.  Nor should you change banks during this time.
5. Don’t forget to pay your bills — even the ones in dispute.  Also make sure all rent payments are made on time.
6. Don’t open new credit cards — even if you’re getting 20% off. (And yes the offers at some of the department stores are tempting but resist the temptation!)
7. Don’t make big purchases on the existing credit cards. The time to buy the new furniture and appliances on credit is AFTER you own the home, not before.
8. Don’t close any credit card accounts (I know this one seems weird). The reason is that it may change your debt to income ratios, which help determine how much mortgage you qualify for.
9. Don’t accept a cash gift without filing the proper “gift” paperwork. Ask your lender what documentation is required.
10. Don’t make random, undocumented deposits into your bank account.  Keeping good records is key.

If circumstances dictate that you might need to engage in some of these behaviors, always talk to your loan officer first.  Follow their advice. If you need a referral to a good loan officer who can help you through the process, I’d be happy to provide one.