Many borrowers in California end up paying mortgage loan origination fees when buying or refinancing…
If you’re in the market for a home in Walnut Creek or anywhere in California, you are probably looking at applying for a mortgage. What many home buyers don’t realize as they are getting caught up in the excitement of a new home is the things they do before the closing can jeopardize their mortgage approval.
It’s important to keep making good financial decisions, especially before applying for a loan or when a mortgage approval is in the works. Not only should a home buyer be financially careful during the time before a home purchase but also during the loan approval time including right up until the closing.
Keep New Debt to a Minimum
Before buying a home, you want to reduce your financial expenses as much as possible. Taking on any additional debt before applying for a mortgage is not a good idea since your debt-to-income ratios are one of the qualifying aspects when being approved for a mortgage. The higher the debt ratio, the riskier you are perceived.
Don’t Make Any Major Purchases
Buying something large like a new car or pieces of furniture may lead to a lender rejecting your application. The closing on a home requires that you have cash on hand. Making large purchases can reduce that cash that the lender wants to see in your account and the added debt could affect your ratios.
Clean Up Your Credit
It’s important to understand your credit score and strive to clean up any issues on your credit report before applying for a mortgage. Improving your credit score and protecting a good score can make a big difference when it comes to a mortgage approval — or denial.
Don’t Close a Credit Card Account
If you have paid off a credit card, it may feel good to close it and put it behind you. But closing a credit card reduces your access to available credit and this, in turn, can affect your credit score. Don’t use the credit card but don’t close it down.
Don’t Change Bank Accounts
Keep your bank account and avoid making large deposits and withdrawals. If necessary, to do so, keep a complete paper trail.
Don’t Switch Jobs
Switching jobs right before a mortgage application or a closing may hurt your approval. A lender is looking for stability and the ability to maintain a source of income. Many lenders are looking for borrowers with at least a two-year history in the same type of employment or a similar pay structure. A stable job with sufficient income is important at this point.
Consider Your Partner’s Credit
If you are purchasing your first home together, you will want to have a conversation about your partner’s credit and any other financial subjects that will be part of the mortgage application process. Finding out your partner has a poor credit score or a large amount of debt after you have found your dream home is an unpleasant surprise.
Do Get the Advice of a Professional
Having the assistance of a professional mortgage broker in California can help you understand your financial profile and he or she can suggest ways to address any problems. At Bridgeport Funding, we would be glad to discuss your mortgage lending strategies. Call us at (925) 478-8630 for a no-cost consultation.