While you are considering the purchase of a home, you should not do anything that will have an adverse effect on your credit score or employment while your loan is in process.
When you are moving into a new home, you might be thinking about purchasing new appliances or furniture, but this is really not the right time to go shopping with your credit cards. You’ll want to remain in a stable position until the loan closes and give us the opportunity to help you close your loan as smoothly as possible. Here are a few dos and don’ts.
DON’T APPLY FOR NEW CREDIT OF ANY KIND
You will receive invitations to apply for new lines of credit, but do not respond. If you do, the company will pull your credit report and this could have an adverse effect on your credit score. Likewise, don’t establish new lines of credit for furniture, appliances, computers, fences, etc.
DON’T PAY OFF COLLECTIONS OR CHARGE OFFS
Once your loan application has been submitted, don’t pay off collections unless the lender specifically asks you to in order to secure your loan. Often times, paying off old collections will cause a drop in your credit score.
DON’T CLOSE CREDIT CARD ACCOUNTS
If you close a credit card account, it can affect your ratio of debt to available credit which has a 30% impact on your credit score. If you really want to close an account, do it after you close your mortgage.
DON’T CHANGE ANYTHING ABOUT YOUR CURRENT EMPLOYMENT
Changing jobs, being laid off or taking medical leave can adversely affect your mortgage. Lenders verify your employment on the day of closing. If your employment status changes, please consult your loan officer right away.
DON’T CONSOLIDATE DEBT TO ONE OR TWO CARDS
Once again, we do not want you to change your ratio of debt to available credit. Likewise, you want to keep beneficial credit history on the books.
DON’T MAX OUT OR OVERCHARGE EXISTING CREDIT CARDS
Running up your credit cards is the fastest way to bring your score down and it could drop up to 100 points overnight. Once you are engaged in the loan process, try to keep your credit cards below 50% of the available credit limit.
DON’T RAISE RED FLAGS TO THE UNDERWRITER
Don’t co-sign on another person’s loan, or change your name or address. The less activity that occurs while your loan is in process, the better it is for you.
DON’T ACCEPT GIFT MONEY WITHOUT CONSULTING US
Make sure you speak to us before receiving, depositing or using any gift money. It is very important to follow the proper procedures.
DON’T DEPOSIT LARGE SUMS OF CASH
Do not deposit large sums of cash into your accounts unless you can provide documentation and a complete paper trail. If you have any deposits that are not related to payroll, tell your loan officer right away.
DO STAY CURRENT ON ALL EXISTING ACCOUNTS
Late payments on your existing mortgage, car payment, rent or anything else that can be reported to a credit reporting agency can cost you dearly. One 30 day late payment can cost you 30-75 points on your credit score.
DO CONTINUE TO USE YOUR CREDIT AS YOU NORMALLY WOULD
Red flags are easily raised within the scoring system. If it appears you are diverting from your normal spending patterns, it could cause your score to go down. For example, if you’ve had a monthly service for Internet access billed to the same credit card for the past three years.
DO CALL US
If you receive notification from a collection agency or creditor that could potentially have an adverse effect on your credit score, call us at 303-740-8300 so we can try to direct you to the right resources and prevent any derogatory reporting to credit bureaus.
One of the best things that you can do to improve your homebuying experience is work with a proven mortgage lender that you can trust. The team at Security First Financial is dedicated to providing an efficient and stress-free mortgage process with all of the options, answers, and expert guidance you’re going to need. Give us a call at 303-740-8300 or visit us at www.sffmortgage.com.