Do's and Dont's
When purchasing or refinancing a home, it's important to know what potential obstacles to avoid and what necessary steps to take to ensure a smooth closing.
Do ask for a credit report. Review your credit report to ensure all active accounts are accurate. Please be aware that credit reports typically have a delay from the last reported date and balance with each account and your current credit balance. Ask about how your credit score is calculated. There are several factions, including history of timely payments, credit utilization percentage, number of accounts, and more that are factored into your credit scores.
Do not open or cancel credit cards or credit accounts. In fact, cancelling a credit card will typically hurt your credit, rather than help it. Do not increase your credit card balances. Increasing your credit balances may actually affect your ability to qualify. Debt-to-income (or DTI) includes the minimum monthly payment for credit cards. Typically, the higher a credit card balance, the higher the minimum monthly payment. Too high of a DTI ratio can prevent you from qualifying. Avoid additonal inquires with your credit. Too many hard inquires on your credit can lower your credit score. However, with homebuying or refinancing, you have a 30-day window to shop rates with mortgage lenders. The 30-day time period begins with the first mortgage lender's credit pull. This will allow you to have your credit pulled with multiple lenders to ensure you are shopping for the best rate and fees.
Do save as much money as possible. Assets include any accounts used for your cash-to-close - including checking, savings, money market, and other forms of liquidable accounts. Investment, IRA, and certain retirment accounts can also be used for assets. However, it is important to discuss these types of accounts with your Mortgage Advisor. Certain penalties may apply with these types of account and that may lower the total amount that can be used to qualify. Your trusted Mortgage Advisor will communicate the minimum amount of assets (i.e. cash) needed to qualify.
Do not deposit larges amount of cash from unverifiable sources (i.e. cash from a safe). Large cash deposits will raise questions from underwriters and, if not verifibable, may not be used for your total assets. Discuss any large deposits with your Mortgage Advisor first, before moving forward.
Do remain employed throughout the entire closing process. Qualifying income is typically income that is shown to be consistent and remain consitent for 36-months, or three years. If you are looking to change employers, discuss the move with your Mortgage Advisor. Changing employers does not automatically disqualify your income, however changes to employment can and will impact your qualification. There are several factors with a change of employment that are analyzed when closing on a mortgage loan. It is also important to continue to work stable, consistent hours when you are an hourly employee. Hourly pay may be calculated using a historical average.