Buying a new home is an exciting process. However, amongst all that excitement lies the challenge of navigating various requirements and processes, including the home loan application process. One thing that many buyers don’t realize is that until your loan is closed and the home is in your name, there are many things that can impact the process, even if you’ve been pre-approved. Here are a few things to avoid doing after applying for a home loan that could impact your ability to close on your loan—
The job of a loan underwriter is to make sure that you have the income and assets to pay off the loan and to ensure that there is low risk that you will default on the loan. If you make another large purchase while you are in the process of waiting for your loan to close, this could be a red flag to a loan officer that signals that you may be a higher risk than originally thought.
Just like making large purchases, opening or closing lines of credit can also increase the perception of risk that’s associated with lending to you. In large part, this is because opening or closing lines of credit can impact your credit score, which is one of the major factors that are considered by a bank when offering a loan. If you open a new line of credit, this also increases the amount of debt that you’re likely to be liable for each month, which in turn decreases the amount of income you may have available for repaying your mortgage loan.
In most cases, mortgage lenders like to see that you’ve worked in the same job for at least two years and have two years of tax returns to prove it before they issue a loan. If you change jobs, this could impact your income and your risk profile, both of which could affect your ability to secure a loan.
One of the worst things that you could do while waiting for your mortgage loan to close is to tie yourself to another debt obligation by co-signing on another loan, even if you’re not going to be the person who’s primarily responsible for paying that loan. When you sign on another loan, you are legally responsible for that payment. This will impact your risk profile and could result in your mortgage lender canceling your loan application.
In short, the best idea when you’re in the process of waiting for a loan to close is to avoid any major financial changes. If you have more questions about things to avoid when applying for a home loan, your mortgage lender is a great resource. An experienced realtor should also be able to answer your questions and provide basic financial advice. To learn more, call The Jana Caudill Team today. We look forward to working with you!
