Creditworthiness – Don’t Hurt Yours

There’s one simple rule you need to listen to when you’ve applied for a loan: DO NOT CHANGE YOUR CREDIT PROFILE.

Whether you’re refinancing or purchasing, there is no easier way to cause problems for your mortgage loan officer, your bank, and the approval of your loan than to play with your money too much.

What does this mean?  Some of it is obvious:

–       Continue to pay your bills as normal

–       Do not buy another property

–       Do not hide assets or, especially, debts.  This includes hiding fully paid off properties – make sure you’re upfront about them.

But there’s a lot more to it than that.  Almost everything we do in the modern American world affects our creditworthiness, so here’s a list of other things to keep in mind.

–       Credit cards: Don’t apply for a new one, don’t cancel and old one, and do not increase your credit limits

–       Employment: Don’t change jobs, even for one for more money, without talking to your Loan Officer about it first.  This is especially true if you do not have regular employment (in other words, you’re a “Freelancer,” “Contractor,” “1099 employee,” or some other such description).

–       Co-signing: Just don’t do it.  Whether it’s your kid’s student loan or your mother’s car loan, it’s going to affect your credit profile.  Once you apply for a mortgage, do not do this.

–       Vehicles: Another big “nope.”  Don’t buy a new car, truck, van, boat, airplane, or spaceship.  Don’t do it even if you’re buying in cash.

–       Banks: Don’t change your bank.  Don’t close accounts.  Don’t open accounts.  Don’t move large amounts of money between accounts.

–       Documentation: Document everything you do, especially if it involves large sums of cash.  Keep a list of all of your open bank, credit, loan, etc., accounts.  Document all money going in and out of them.

–       Purchases: Similar to what I said for vehicles, just don’t make large purchases.  Large amounts of cash moving in or out of an account look suspicious and require significant documentation.

–       Down payments, cash at closing, inspection costs, bank costs, etc.: Large amounts of money ARE going to move out of your accounts during the process.  Make sure they relate to the loan, and document both where the money is going to and where it came from.  Do not deposit a large amount of money shortly before closing – the lender will want documentation on where that money came from.  You cannot use someone else’s money for cash at closing without the approval of the lender.  If you’re taking money from your 401k or from investments prior to pay the amount you owe at closing, do it ahead of time and tell your lender about it.

–       Other properties: Disclose them.  Even if they’re completely paid off, your lender needs to know about them.

Purchasing a house – or refinancing your existing one – is one of the largest transactions most people will make in their lives.  Pay attention what you’re doing, and to these rules, and don’t be caught unawares.  If you’re looking for a new bank or loan officer, contact us today for a referral!

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