When you are in the middle of obtaining a San Diego Mortgage, whether it is for a purchase or refinance, it is important to not take any actions that will jepordise it. I have seen and heard of many instances over the years where clients are in the middle of a San Diego Home Loan transaction and they decide to buy new furniture or even a car and the additional monthly expenses or the affect on their credit score cause them to no longer qualify.
There is a list of “Don’t Do” items when you are in the middle of a loan that all good San Diego Loan Officers should provide you. I have outlined my list below, with some additional explanations:
DON’T make a major purchase (car, appliances, jewelry, etc.) – any extra monthly payments may affect your debt to income ratio and if you are tight with qualifying this may push you over the top. It may also have a negative effect on your credit score and therefore the San Diego Interest Rate you can obtain.
DON’T apply for new credit (even if you seem pre-approved) – Any new credit could potentially lower your credit scores and even if your score is high enough that a few points won’t matter, any new inquiries on your credit report will cause the lender to question what the new account is.
DON’T transfer any balances from one account to another – Transferring balances can’t be helped in some cases, but if balances are going to be transferred we are going to need to see a paper trail showing where the money came from and where it went. Try to avoid it if you can because it will require more paperwork and could cause an issue.
DON’T pay off collections without a discussion with us first – This may seem like a strange one because you may think that paying off delinquent credit would be good, but it can actually lower your score in the short term. If you pay off a collection that is 4 years old today, it now brings that collection current on your credit report and shows it paid as of today’s date. The more recent the date of the collection on the report, the more affect it will have on your credit score.
DON’T pay off charge-offs without a discussion with us first – Same reasoning as above.
DON’T deposit cash into your bank accounts – Cash cannot be traced and we have to be able to document any large deposits.
DON’T buy any furniture – Again any new monthly payments could hurt your qualifying and if you open a new store account it could hurt your credit score.
DON’T close any credit card accounts – This again is counter intuitive. Many people think they should close any unused credit cards before they apply for San Diego Home Loans, but this can actually lower your credit score. One portion of your credit score is determined by your total credit balance versus your total available balance. If you close accounts that have no current balance and only keep accounts with balances, you increase the ratio of current balance versus available balance and this will lower your score.
DON’T consolidate your debt into 1 or 2 credit cards – Same reason as above. It is better to have the debt spread out amongst your cards.
DON’T change bank accounts – Underwriters want to see a history with your bank account, so if you change in the middle of a transaction, we will have to wait until you have a new statement available and this could delay your closing.
DON’T max out or over charge on your credit card accounts – Many times lenders will check your credit again before closing and if you have increased your credit card balances significantly, they will have to use the new payments in your debt to income ratios. This can also lower your credit score and cause the interest rate to be higher.
DON’T start any home improvement projects – When the appraiser inspects the house, if there are any areas that are not completed, he may comment on that and the lender could require those areas to be finished before the close of escrow.
DON’T open a new cellular phone account – This could negatively affect your credit score.
DON’T pay off any loans or credit cards without discussing it with us – Any change to your credit profile could affect the loan and you may need those funds for reserves or closing costs instead of paying off your debts.
DON’T transfer funds between different bank accounts while in escrow – Any transfers will have to be documented. If you are transferring your down payment from savings to checking or from stocks to checking, that is okay, but it should be done at one time and with enough time to get the paper trail and proof of transfer to the underwriter for review.
DON’T accept any GIFT money until we first discuss what documentation is necessary – When getting gift funds, the guidelines can be strict on how we need to document it. We will need a paper trail and the funds should never be cash and can usually only come from relatives.
Here are some things that you should continue to do while in your buying or refinancing:
DO continue making your mortgage or rent payments – Seems like common sense, but I have had people stop paying because they thought any payments would be added to the new loan amount.
DO stay current on all existing accounts – Late payments in the middle of San Diego Home Loans can cause your loan to be denied or the rate to be increased.
DO keep working at your current employer – Do not change jobs in the middle of the loan process. The lender will do a verbal verification before funding and if you do not work at the employer on the application, your loan will not fund and we will have to start over.
DO continue living at your current residence – Changing addresses can cause confusion during underwriting, so try to stay at the same location.
DO continue to use your credit as normal – Don’t stop using your credit cards all together. Use them wisely.
If you encounter a special situation, it is best to mention it to us right away so we can help you determine the best way to achieve your goals. I have been a San Diego Mortgage Broker for 12 years and have seen many unique situations.