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Oct 04

Mortgage Helpful Hint #3

No New Debt!

This mistake can cost $50,000 or get the loan declined!!! Read Carefully!

Be very careful during the mortgage processing period.  Do not take on any new debt without first chatting with your loan officer.  And DO NOT CLOSE ANY ACCOUNTS, doing this can drop your credit score below the threshold or make the interest rate on the mortgage increase!!!

The mortgage underwriter is REQUIRED to do a soft pull of your credit report on midnight the night before you close on the loan.  Any new debts may cause the deal to crash and burn!!!

 We often see people buying new furniture for their new home, do this AFTER you close the mortgage on the house, not before.  Even if it is something advertised as no payment for 6 months, etc.  It is still a debt!!  

The same is true for a new car, boat or airplane.  Yes, I have seen that one too.   Do not buy anything that requires debt without chatting about it with the loan officer BEFORE doing it! 

I have seen many home buyers make this mistake.  Any new debt during the processing period might change the status from approved to decline, no one wants to see that happen.

Just slightly increasing the balance on a credit card can have a negative impact on your credit score and or debt ratio.  That could easily cost $50,000 in EXTRA interest because if your credit scores go down the interest rate will go up!  Don’t let a $50 impulse purchase cost a year’s pay.

The mortgage lender is taking a snap shot of the entire process, if you change something the picture changes.

Maxing out a credit card is a common mistake people make while applying for a mortgage.

 

KEEP THE BALANCES WHERE THEY ARE NOW OR LOWER! 

If you have a credit card with a $400 limit and you let the balance go above $300 your scores will come crashing down.  75% is the magic number, if you get any closer than that to the limit, you are getting close to lower credit scores.  The best move is to keep the balances at or below where they were when the loan officer pulled your credit report. 

If you pay off a debt – keep copies of the transaction.  Don’t forget the lender must show where the money came from to pay it off.  See Helpful Hint #2 about moving money around.

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  1. Mortgage Helpful Hint #4 - Jim Simms - The Mortgage Hub - Louisville

    [...] If you go on vacation the week before closing and run up the balance on a credit card you loan might be in jeopardy and may not close.  See Helpful Hint #3 on New Debt. [...]

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