Don’t Do These Things After You Apply for a Home Loan

‍ When applying for a home loan, your first instinct is probably to cut costs wherever possible. After all, lenders will look favorably upon applicants with a low cost of living. But there are some things you should not skimp on when applying for a home loan. These five things could have an impact on whether or not you’ll be approved for the loan, and in what capacity. Staying within your budget with these factors will also help you avoid unnecessary red tape down the road.

Don’t Deposit Large Sums of Cash

If you’ve recently acquired a large amount of cash, the underwriter may wonder where the money came from. While they may not think you stole the cash. They may believe you acquired the funds illegally. To avoid wasting time and energy explaining yourself. Avoid depositing large sums of cash. If you’ve inherited a large sum of money and need to prove it. You may have to get a letter from the executor of the estate. Most lenders will expect you to use the funds for the down payment, closing costs, and upfront home repairs. If you can’t explain where the cash came from. It could delay the process.

Don’t Co-Sign Loans for Anyone

If an acquaintance or family member asks you to co-sign a loan, don’t do it. Co-signing a loan means you are equally liable for paying it off if that person can’t pay. While it may seem like a good idea to help someone out. It could come back to bite you in the long run. If someone defaults on a loan you co-signed. You could lose your assets and face liens on your credit report. If you are applying for a home loan and have co-signed a loan in the past. You should disclose the information on your loan application.

Don’t Make Any Large Purchases

If you’re planning to use your home loan to buy a car or boat, you’ll need to consult with a mortgage broker. If you’re planning on purchasing a new car, you may be required to take out an equity line of credit. While an equity line of credit works similarly to a home equity loan. You’ll be allowed to use the cash for other expenses. If you’re planning to use your home loan to buy a new boat. You may be required to take out a commercial loan. Commercial loans tend to be more difficult to obtain than a traditional mortgage.

Don’t Switch Bank Accounts

If you’ve recently opened several bank accounts. The underwriter may wonder why. If it looks like you’re trying to obtain cash from a variety of sources. The underwriter may worry you’ll spend the money and never pay off the home loan. While it’s okay to have multiple bank accounts, if you recently opened a new account, the underwriter may question the reason behind the move. If you have an excellent credit score, you can easily open new accounts, such as an online savings account, or a checking account with no monthly fee.

Don’t Close Any Accounts

If you’re trying to build a positive credit history. You can’t close accounts that have a positive history. If you have an account with a high credit limit with a $0 balance. It’s better to keep the account open. If you’re trying to repair your credit score, you can try to get a secured credit card. A secured credit card requires you to put some money into a prepaid account. If you close an account with a positive history. You may be able to get it reopened later. This doesn’t necessarily apply to mortgage loans, but it can impact your ability to get approved for other types of loans, like auto or personal loans.

Don’t Apply for New Credit

The underwriter may view the number of recent credit inquiries negatively. If you have applied for several different loans in a short time frame. The underwriter may assume you’re desperate for cash. If you’re in a rush to get your loan approved. It may be better to wait a few months and apply for a loan. The fewer credit inquiries you have in a short amount of time, the better. Keep in mind that the number of recent inquiries and the total number of inquiries on your credit are two different things. You can have a high number of recent inquiries and a low total number of inquiries. The best way to avoid a low credit score is to pay off your bills on time. This will also help you avoid late payment penalties and other fees.