Applying for a Mortgage? Here Are 5 Things to Avoid After You Do It

If you’re trying to buy a house, applying for a mortgage is probably on your “to-do” list. Once you’re approved, don’t assume you’re free and clear. There are things that can derail your loan and cause you to lose the house. Here are five things you should avoid doing after you apply for a mortgage.

Opening or Closing Credit Cards

When a lender approves you for a mortgage, it looks at several ratios involving your finances. One of them is a debt-to-income ratio, or DTI. If your DTI is good, it’s much easier to get approved. Then, if you apply for a new credit card, or close an old card, these actions can change your DTI. Sometimes it changes enough to knock you out of the range lenders want to see. The result? You lose your loan.

Making Large Purchases

If you’re trying to purchase a home, now’s not the time to buy a new vehicle or a lot of furniture. Buying it on credit can change your credit score and your DTI ratio. Buying it with cash may throw off the initial investigation the lender did into your finances. Between the time you apply for your mortgage and closing day, don’t rock the boat.

Paying Your Bills Late

Mortgage loan decisions are heavily affected by a borrower’s credit score. The biggest single factor in keeping your credit score high is, you guessed it, paying your bills on time. Recent late payments are especially detrimental to your score. If you apply for a loan, it’s important to keep everything the same from the time of your application to closing. A few days before closing, the lender reviews a fresh credit report again. If you incur new late payments, it may throw your loan into jeopardy.

Quitting Your Job

This may seem obvious, but people have quit their job during their homebuying process. Spoiler alert: It never works out well! Maintain your employment. Don’t move to part-time. Don’t even change companies for the same rate or better pay. Any change in employers or income needs to be verified by the lender, which can put a snag in your mortgage timeline. Wait until you’re moved in to make a career change.

Co-signing a Loan

Although it may be difficult to say no when a family member or friend asks for your help, it’s advisable to never co-sign for a loan. The risk to your credit is just too great for it to ever be a smart move. This is especially true after you apply for a mortgage. The extra debt (yes, the loan will be counted as your debt) plus the risk of the signee paying late make it a very risky decision. If you’re approached to co-sign, explain that unfortunately, you must say no.

Your work isn’t done after you apply for a mortgage. You still need to be diligent in protecting your income, credit score, and avoiding new debt. Don’t worry, it’s not forever. And your new home will be worth the short-term sacrifice.