Here is a list of things to avoid if you are planning a new home purchase or a refinance. You want to keep your credit score as high as possible. Try to avoid anything on the list to make sure you can qualify for a mortgage.
-Avoid bankruptcy and being foreclosed on. This is the number one thing to avoid. A foreclosure could mean you need to wait 4-7 years before you can get a new mortgage. You also want to avoid mortgage lates. Even if your credit score is high enough to meet underwriting guidelines, late mortgage payments may disqualify you. Many programs require no mortgage lates in the previous 12 months.
-Not locking in your mortgage rate. If you forget to lock in your rate, it may go up and you may not qualify for the home you want. I always tell clients that if they are not locking in the rate right away, they will want to stay in touch with me daily to make sure they know what is going on with mortgage interest rates.
-Listing your home for sale before you refinance. If you list your home for sale on the MLS and then decide to refinance instead, you will usually need to wait at least 6 months. Most lenders do not like the idea of giving you a new loan when you were just thinking about selling your home.
-Having major derogatory accounts on your credit report. If you are applying for a new mortgage, try to avoid having charge offs and collections on your credit report. Both will lower your credit score and you may need to pay them off to qualify for the new home. Review your credit report at least once a year to avoid any surprises.
-Not knowing what you can afford. You want to get pre-approved before you start your home search. There is nothing worse than thinking you can afford the home of your dreams and finding out that you can’t qualify for that home. Then it seems like every home will disappoint you if you can’t get that home you really wanted!
-Opening new credit cards or spending a lot on current cards. Either one of these could affect what you can qualify for. Yes, your lender pulled your credit report, but they are still going to check your report right before closing. They are looking for new debt or higher debt than you had – either one could affect your mortgage approval.
-Applying for a mortgage with a limited employment history. You will need two years of employment to qualify for a new mortgage. Switching jobs a lot can hurt you, if you have less than two years of employment, you may not be able to qualify for a new mortgage.
-Not having seasoned assets. Your lender will want to see two months of bank statements. The money you are using for closing needs to be in the bank so your lender can verify it. If you are getting a gift, make sure your lender is aware of that and also follow their guidelines to make sure the gift money is documented correctly.
Talk to your lender if you have questions or aren’t sure about something. I would rather have a client call me and ask about buying something or bank deposits than to have them do something that can affect their ability to get a mortgage! As I have said to many clients, there is no such thing as a dumb question! If you aren’t sure, please ask! We want your mortgage process to go smooth and we also want to make sure you understand the process! Feel free to ask questions!!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website