Here are 10 things you’ll want to AVOID doing during the loan approval process:
1. DON’T: OPEN NEW LINES OF CREDIT.
New credit cards or loans can lower your credit score or increase your debt-to-income ratio (DTI). That also includes “buy now, pay later” arrangements from services such as Klarna and Affirm. Closing accounts can also reduce your credit history and hurt your score.
2. DON’T: CHANGE JOBS.
Making big changes to your job or other sources of income can delay or derail your approval. This includes switching from salaried to self-employed, commission-based, or changing employers.
3. DON’T: MAKE LARGE, UNVERIFIED DEPOSITS.
All funds used in a homebuying transaction must be sourced, and large, unverified deposits can raise red flags during the loan process.
4. DON’T: MISS A CREDIT PAYMENT.
Even one late payment on any line of credit can negatively impact your credit score and jeopardize loan approval.
5. DON’T: MAKE MAJOR PURCHASES.
Avoid buying other real estate, cars, furniture, or appliances on credit until after closing. Large purchases can increase your debt load and affect your loan qualification.
6. DON’T: START HOME IMPROVEMENT PROJECTS.
This can create unexpected expenses and disrupt your financial profile, potentially affecting your DTI. Stability is key during this period, so it’s best to wait until after closing to begin any renovations.
7. DON’T: CO-SIGN FOR ANYONE.
Co-signing makes you financially responsible for that debt, even if someone else is making the payments.
8. DON’T: MOVE MONEY INTO OTHER ACCOUNTS.
Transferring funds between accounts can make verifying assets more difficult. Always ask before moving money around.
9. DON’T: CHANGE BANK ACCOUNTS.
All funds need to be documented with a consistent paper trail. Changing banks during the loan approval process can complicate this process.
10. DON’T: IGNORE LENDER REQUESTS.
Failing to provide documentation in a timely manner can hold up your closing and create unnecessary delays for all parties.
Most importantly, DON’T make assumptions.
It’s better to double check than to guess. If you’re not sure whether something could impact your loan approval, just ask your lender!
