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Home / Blog / Mortgages / Top Things to Avoid Before Applying for a Mortgage

Top Things to Avoid Before Applying for a Mortgage

February 17, 2020 By Admin

green house keychain with 2 silver keysIf you plan to buy a home in the upcoming months, there are some things you should avoid that could negatively impact your FICO score. This is important because a lower FICO score could result in paying a higher interest rate, and possibly result in being turned down for a mortgage to buy a home.

Here are the top things homebuyers should avoid before applying for a mortgage, and while going through the entire home buying process. 

1. Avoid Making Large Purchases with Credit 

Credit utilization is one of the largest factors of a FICO credit score. Most lenders prefer to see applicants utilizing no more than 30% of their available credit, while also maintaining a good debt-to-income (DTI) ratio.

Making a large purchase with credit before applying for a mortgage can negatively impact your FICO score, as well as your ability to qualify for a mortgage.

Related: What is your debt-to-income ratio, and why is it important in qualifying for a mortgage?

2. Avoid Spending Your Savings 

Lenders need to see cash available for the down payment and closing costs. So, spending your savings can eventually create a problem. Furthermore, you may be required to have additional cash reserves in the bank, depending on the type of mortgage loan.

If you are going to make any substantial changes regarding your cash savings, consult your mortgage broker to see how it will affect your mortgage application.

3. Avoid Applying for More Credit 

When you apply for credit, such as a credit card, the company providing the credit will do a hard inquiry (also known as a “hard pull”), which could lower your credit score by a few points. Furthermore, opening a new credit account will lower your average account age, which can hurt your FICO score.

In general, credit accounts that have been open longer are better for credit than new accounts. 

4. Avoid Closing Credit Accounts 

Closing credit accounts can negatively impact your credit score, especially if you have high balances on your other open accounts. In most cases, it’s better to leave all your credit accounts open to maintain a lower credit utilization. 

5. Avoid Poor Credit Management Practices such as Late Payments 

You should always practice good credit management; however, it is critical to properly manage your credit when applying for a mortgage.
Paying bills late, missing payments, and having too many hard inquiries on your credit report can reduce your FICO score. 

6. Avoid Initiating Major Life Changes such as Changing Jobs 

Job changes, having a child, moving unexpectedly, leaving a job, and taking a long leave of absence from work are all examples of enormous life changes that can have an impact on an applicant’s eligibility for a mortgage.

Lenders want to see stability when reviewing a mortgage application. Borrowers should avoid initiating sudden life changes that have a negative impact on their finances or disqualify them for a mortgage in any way.

7. Avoid Marrying Someone with Bad Credit 

Marriage is a big decision. However, when an engaged couple is thinking of buying a home, it can become more complicated. If one partner has significantly worse credit than the other, it can negatively affect the chances of qualifying for a mortgage. In many cases, one partner’s good credit cannot make up for the other’s bad credit. 

8. Avoid Cosigning on a Loan 

Cosigning on a loan can affect your ability to qualify for a mortgage. By cosigning, you agree to be fully responsible for the debt, so the loan will appear on your credit report. Therefore, your debt-to-income ratio will be higher with the co-signed loan, which can affect your ability to qualify for a mortgage. 

9. Avoid Depositing Large Sums of Money Without Documentation 

When applying for a mortgage, any large sum of money deposited in your bank account for at least the previous two bank statements should be documented. It should also be from an eligible source. Large cash deposits, therefore, should be avoided.

If you have any questions, consult your mortgage broker before making these deposits.

Marimark Mortgage

Marimark Mortgage is based in Tampa, Florida and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania. We walk our clients through the process of getting a mortgage, helping them avoid costly mistakes.

We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.

To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application, or contact us direct.

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Filed Under: Mortgages

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

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