www.kristinvaughan.com

I learned a long time ago that “com­mon sense is NOT com­mon prac­tice“. This is
espe­cially the case dur­ing the emo­tional time that sur­rounds buy­ing a home, when peo­ple tend to do some non-commonsensical things. Here are a few that I’ve seen over the years that have delayed (and even killed) deals:

1.  Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really trace­able. Small, explain­able deposits are fine, but get­ting $10,000 from your par­ents as a gift in cash or sell­ing a car for cash is not. Dis­cuss the proper way to track your assets with your loan officer.

2.  Don’t make any large pur­chases like a new car or a bunch of new fur­ni­ture. New debt comes with it, includ­ing new monthly oblig­a­tions. New oblig­a­tions cre­ate new qual­i­fi­ca­tions. Peo­ple with new debt have higher ratios…higher ratios make for riskier loans…and some­times qual­i­fied bor­row­ers are no longer qualifying.

3.  Don’t co-sign other loans for any­one. When you co-sign, you are oblig­ated. With that oblig­a­tion comes higher ratios, as well. Even if you swear you won’t be mak­ing the pay­ments, the lender will be count­ing the pay­ment against you.

4.  Don’t change bank accounts. Remem­ber, lenders need to source and track assets. That task is sig­nif­i­cantly eas­ier when there is a con­sis­tency of accounts. Frankly, before you even trans­fer money between accounts, talk to your loan officer.

5.  Don’t apply for new credit. It doesn’t mat­ter whether it’s a new credit card or a new car, when you have your credit report run by orga­ni­za­tions in mul­ti­ple finan­cial chan­nels (mort­gage, credit card, auto, etc.), your credit score will be affected. Lower credit scores can deter­mine your inter­est rate and maybe even your eli­gi­bil­ity for approval.

6.  Don’t close any credit accounts. Many clients have erro­neously believed that hav­ing less avail­able credit makes them less risky and more approv­able. Wrong. A major com­po­nent of your score is your length and depth credit his­tory (as opposed to just your pay­ment his­tory) and your total usage of credit as a per­cent­age of avail­able credit. Clos­ing accounts has a neg­a­tive impact on both those deter­mi­nants of your score.

The best advice is to fully dis­close and dis­cuss your plans with your loan offi­cer before you do any­thing finan­cial in nature. Any blip in income, assets, or credit should be reviewed and exe­cuted in a way to keep your appli­ca­tion in the most pos­i­tive light.