What Are The Things To Avoid When Applying For A Texas Mortgage

6 Things You Must Never Do When Applying For A Mortgage In Texas

Applying for a mortgage is never an easy process. Although you might have been pre-approved or have all the documents ready to make an application, it is never a done deal until you have signed the closing papers. Whether looking for refinancing for your current home, or wish to buy a new one, specific actions can give the underwriter the impression that you aren’t in a position to repay the loan. This is one of the reasons you need to be careful right before and after applying for a mortgage. Here are some of the things you mustn’t do:

1. Avoid Making Large Withdrawals Or Deposits

Making large deposits and withdrawals from your account a few weeks too and after applying for the mortgage could raise a red flag, causing the application to be denied. Recent bank statements are a standard requirement when applying for mortgage loans. If for one reason or another happen to make a large withdrawal or deposit, you then should discuss the same with your mortgage office when submitting the application. Although such deposits/withdrawals may not be a deal-breaker, the nature of the deposits and the source of the funds should be discussed before the application is made. This will help avoid red flags when the application is being processed.

2. Don’t Change Jobs

You also need to provide proof of income (steady) for the mortgage to be approved. That said, you should avoid jumping from one job to another until the mortgage has been processed, approved/closed. If you must, then ensure the new job is within the same industry/niche as the previous one. Switching to a different industry might raise red flags, costing you the mortgage.

3. Don’t Make Large Purchases On Credit

As tempting as it is fighting the temptation to buy a new car or furnish your new home on credit. For starters, making such large purchases on credit means the company will have to pull your credit report, which again could hurt your credit score. Most lenders will see such a large purchase on credit as a risk hence avoid lending you.

4. Avoid A Home Equity Line Of Credit

As earlier mentioned, don’t make any large purchases on credit or even put your home as equity for the same. Although you are free to use your home as a line of credit, the lender may think you rely too much on credit, hence consider you a high-risk customer. As a rule of thumb, show the lender you are capable of living comfortably with your income flow and don’t depend on loans or credit lines. Wait until the loan is closed before using such lines of credit.

5. Avoid Closing Credit Accounts

Avoid the temptation to close any (or all) credit accounts you might have (even if you no longer use them) several months or days before and after applying for a mortgage. Closing these accounts will only lower your available credit, raise your DTI (debt to income ratio), and other chain reactions. Closing these accounts will only put your mortgage at risk, hence not recommended for the moment. Be sure to talk to a financial advisor if thinking of closing one or two of these credit accounts.

6. Don’t Make Payments On Old Collection Accounts

Making payments on old collection accounts could hurt your chances of getting the mortgage approved as well as your credit score. Making payments to these accounts also revives their collection status, meaning the creditor can start pursuing you for debt. Although this depends on the state you are in, creditors can only pursue you for payment for up to 10 years after the last payment.

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