Congratulations! You’ve saved for a down payment, found the home of your dreams and applied for a mortgage. Now is the time to pick out decorations and find that perfect color pallet for the bathroom. However, before you make any major purchases or big life changes, you’ll want to see how they may impact your home loan. As you continue on the home-buying journey, keep in mind these four tips on what to do after applying for a mortgage.
1. Avoid major purchases
Even though you’re dreaming of the perfect décor, it’s best to avoid furnishing your new home just yet. Anything that will create a monthly obligation will increase your debt-to-income ratio. This includes a credit card balance, a car loan or a personal loan to pay for new furniture. By keeping your debt-to-income ratio as low as possible, the loan amount you qualify for will be higher (compared to what it could have been with a higher ratio). Also, if you avoid making big purchases with cash, you will preserve the money you have available for the down payment. Keeping your entire financial situation in mind is important so you end up with the best loan possible.
2. Stay current on your bills
This one is always solid advice, but it’s especially important now. Lenders need to see how financially responsible you are, and payment history is a big part of your overall credit score. You’ll also need to disclose any material changes in your application before closing, such as falling behind on credit card payments. By staying on top of your bills, you’ll help keep the ball rolling and avoid higher interest rates.
3. Pay attention to your credit score
What to do after applying for a mortgage includes monitoring your credit score. Try to avoid raising credit card limits or opening a new account. By keeping your current accounts, you are maintaining (and adding to) your average credit age, which will only improve your credit score. In addition, make sure to avoid closing an old account you don’t use or need. It might sound like a good idea to close out unused credit lines, but the length and depth of your credit history contribute to the total score, so keeping accounts open won’t negatively affect those components.
It’s also a good idea to make sure any credit disputes are closed before applying for the mortgage. Trying to correct errors after applying for a mortgage could cause delays in the process.
4. Stay consistent with your income
Loan officers often like to see at least two years on the same job. While this is not a strict requirement, this timeframe shows that you are responsible and committed. Borrowers with short job histories or frequent changes to employment can appear riskier. With a steady history of income, you’re more likely to receive a favorable interest rate and avoid a large down payment.
Try to maintain the method of your compensation as well. Loan officers need to track and explain your annual income. For example, avoid moving from a salary to a commission-based payment plan if possible.
Last but not least, delay starting a business or becoming self-employed if that’s in your plan. These are wonderful life changes, but staying with a reliable income source until after your home loan closes will help the process lean more in your favor.
Ready to get started? Speak with your First Centennial Mortgage loan officer today about what loan might be best for you. Our highly trained professionals are here to help with all your home loan needs. We look forward to speaking with you on what to do after applying for a mortgage!