There are a lot of things you should do when getting a mortgage, but there are four things you should NOT do! The four are: change jobs, spend a lot on credit cards, buy a car, and make large cash deposits. So, changing jobs–it’s not always necessarily a bad thing, but it can be, especially if you’re going from a salary position to an hourly position, or a salary position to a 1099 position. Forget it! That could ruin your purchase; you might not get a mortgage if you change jobs without a discussion with your mortgage advisor. Even if you’re not happy in your job, sometimes it makes sense to stay in the job until after you close on your home.
The next thing not to do is spend a lot on credit cards. I know that sounds obvious, but many people don’t realize that it can have an impact. I’ve seen situations where people have gone out and spent a lot on furniture to for the new house before the mortgage is fully approved. Others might purchase a big vacation, or just go out on a shopping spree. What happens is they put it all on credit cards and right before closing, then the lender pulls the credit report and sees the new debts, which have created new debt ratios, and the loan is denied. Again, wait until after you close on your home to make any large purchases on your credit card.
Another big “not to do” is buying a car. I get it; sometimes the car dies and you have no option. Before doing that, however, we need to discuss how to do so without affecting your loan qualification. We need to talk about how much you can afford so as not to throw off your debt ratios. It’s also a paperwork nightmare because you get tons of paperwork from the dealer, but nothing really says what your monthly payments are going to be. The lender needs to know that because it won’t show up on your credit report for at least a month; you don’t want it to be a surprise when it does. You also don’t want to co-sign for someone else purchasing a car. Overall, I always try to avoid people buying a new car during the process, but if it’s a necessity, I appreciate when they call me first. That means they took my advice and they understand that it can affect their ability to buy a house. Together, we can figure out what you can afford without it becoming a hindrance to the process.
Lastly, you should not deposit large amounts of cash during the process. The banks want to know where every penny is coming from, so if they see large cash deposits, they worry that somebody else is loaning you money to buy this house and that throws up a red flag. Maybe you simply won $8,000 in the Super Bowl pool and you deposited it into your checking amount. Seems harmless enough, but the bank will think it’s shady and will question where the money came from, and request proper documentation. There are a lot of legitimate reasons to deposit cash; we just need to make sure it’s done in a way that aligns with the proper procedures. For this reason, I always tell people to call me prior to making any large cash deposits.
People aren’t used to really thinking about where their money is coming from, or going to, and how it can affect their chances at getting a mortgage. From the moment you start working with me, I’ll tell you to call me for anything major, or that you think might be major. Call me first and ask, “Do you think I can afford this?” I help you run the numbers to make sure you have enough money for closing costs and to afford what you want to buy. At the same time, I can review the debt ratios, procedures, or whatever else is needed to ensure a smooth loan process.
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