Buying a Property

Do not deposit cash into your bank accounts during the lending process. Banks need to account for all funds (part of the anti-money laundering efforts of our government). If you deposit cash into an account, the bank could disqualify that account. It’s a great practice to not deposit cash into your accounts for at least 2 months prior to applying for a loan, and definitely NOT during the process. Funds into your account are by check or wire only.

Do not apply for new credit of ANY kind during the lending process. You will receive invitations to apply for new lines; DON’T. Do not even reply. Don’t establish new lines of credit on furniture, appliances, electronics, nothing. Why? You’re increasing your debt which lowers your income and the bank will deny your loan.

Also, do NOT consolidate your credit during the loan process. This will change your debt to income ratios and could cause the bank to deny your loan. Likewise, you may also accidentally remove beneficial credit history.

Lastly, do not max-out or go over your credit limits. This is the fastest way to lower your score, even by 100 points – OVERNIGHT. Once you’re in the loan process, do your best to keep your credit usage at a maximum of 50%

Do NOT close existing lines of credit! If you close a credit card or line of credit, it can affect your debt to income ratio / debt to available credit and could affect your score by as much as 30%. If you really want to close it, do so AFTER you have closed on your home.

Do not go shopping. No appliances; no furniture; no trips. Do not spend cash you may need for closing; certainly do not take on any new credit. Did you already forget the above items?

Do not buy or lease a new or used car, during the loan application process. As with items above, anything which incurs more debt equally reduces the funds you have available to pay back the bank. Wait on the car until AFTER you close.

Do not take out any other loan, during the loan application process.  As with items above, anything which incurs more debt equally reduces the funds you have available to pay back the bank.  There are exceptions, but follow the bank’s direction.  For example, if you have a 401k, the bank may allow you to borrow against that as it is collateralized and you are borrowing against your own money.

Do not transfer or deposit large sums of money. All lenders must be cautious to ensure that their loan is not part of any kind of money laundering. Although it may seem silly, moving large sums of money is one of many triggers a bank will look for. If you have no choice, at least speak with your lender and always be certain you have documentation.

Once your loan application is submitted, do not pay off any collection unless the lender specifically asks you to do so in order to secure your loan. Often times, paying off a collection can negatively affect your score.

This one my seem obvious, but, quitting your job or changing jobs, during the loan process, can have serious negative affects on your ability to qualify for a loan. Most times, lenders need to see stable, dependable income – usually for at least 2 years. Lenders will even verify employment on the day of closing.

Do not change jobs…. This mostly a repeat of above, and equally as important.  As with above, this one my seem less obvious, but, quitting your job or changing jobs, during the loan process, can have serious negative affects on your ability to qualify for a loan.  Most times, lenders need to see stable, dependable income – usually for at least 2 years.  Lenders will even verify employment on the day of closing.

Do not accept any gifts of money, ESPECIALLY NOT CASH.  Well, always no cash, but no gifts until you speak with your loan officer.  Why? The gifter must be able to document their source of the funds gifted; and only family members can gift.  If Mom has cash in a mattress saved over time, that’s not good for you.  If Mom has money in a bank account and she can show bank statements and the check or wire used to gift you funds, that’s fine.  But still, ask your lender first! Funds into your account are by check or wire only.

Generally speaking, be careful with your credit during the loan process. If you’re not sure what kind of effect something can have on your credit, call your realtor or lender (lender, preferably). No purchase or change in credit is as important as securing the loan!

Make your payments as normal. Late payments on your existing mortgage, care, credit cards, etc., can adversely effect your new loan process. When you don’t stay current, that’s reported to the credit reporting agency and can cost you the loan. Even one late payment can hurt. Stay on schedule!

The lending system is sophisticated. Red flags are easily raised in the scoring system so if it appears you’re changing your normal patterns, it could cause your score to go down. Do what you’ve always been doing; unless your loan officer says otherwise.

If you receive a notice from a collection agency, or a new bill you didn’t expect or just don’t know if you can spend money on something; make the phone call. Do not lose your loan over something that you didn’t at least ask for guidance on.

Look – money rules the game. To qualify for a loan, you often have to live by the lender’s rules while in the loan application process. It may seem silly, it may be frustrating; but unless Uncle Bob has money to lend you, play by the rules – the transaction will be much easier!