Things To Avoid After Applying for a Home Loan - KAYE SWAIN (2024)

FAQs

What not to do when waiting for mortgage? ›

Racking up Debt

Your debt-to-income ratio – or how much debt you're paying off each month in comparison to how much money you're making – is just one factor that lenders look at when reviewing your mortgage application. If it's above a certain threshold (typically 43%), you'll be considered a risky borrower.

You have an income shortfall

Your debt-to-income (DTI) ratio — the portion of your gross (pre-tax) monthly income spent on repaying regular obligations — signals to lenders whether you're in a position to take on an additional, major debt. If your DTI is too high, you may be rejected for a mortgage.

You don't want to tell the mortgage lender that the house is in disrepair. You also don't want to suggest you don't know where your down payment money is coming from. Finally, don't give your lender reason to worry if your income will stay stable.

Don't make major life changes or expensive purchases on credit. When applying for a new mortgage, don't make significant changes to your financial situation, like switching jobs or making large purchases on credit. Doing so could negatively impact your credit and, by extension, your mortgage application.

If you are currently repaying other debts that limit the amount of cash available for future payments, you can get denied even if you have a good credit score. Multiple credit cards with high balances or large loans with more than half the total balance remaining will not help you in your mortgage-seeking endeavors.

Red Flag #1: When they offer you a rate that's lower than the APR. When a mortgage's APR is much higher than the actual rate, it means that the fees are a lot higher, too - and you'll be paying them over the life of your loan. A low rate might be enticing, but you have to consider the long-term cost.

Can lenders see your bank account balance? ›

You can request your bank to send these electronically or through the mail. The lender will verify bank statements, including deposit history, regular withdrawals, and your current account balance.

Mortgage lenders will often look at your spending habits to determine if you are a responsible borrower. They will look at things like how much you spend on credit cards, how much you spend on groceries, and how much you spend on entertainment.

If the buyer fails to get approval for a mortgage, the buyer can terminate the contract and remain entitled to their earnest money deposit, basically holding the bank responsible for the failed process.

You'll have the best chances at mortgage approval if: Your credit score is above 620. You have a down payment of 3-5% or more. Your existing debts are low.

Clear-to-close buyers aren't usually denied after their loan is approved and they've signed the Closing Disclosure. But there are circ*mstances when a lender may decline an applicant at this stage. These rejections are usually caused by drastic changes to your financial situation.

It's best to avoid making large purchases on credit during the mortgage process. A lender may not care if you use your credit card for smaller transactions, especially if you pay off the card balance quickly. However, larger purchases may give them pause.

Lack of deposit or amount of equity

Many lenders will now require you to have a minimum amount of deposit or a minimum amount of equity. Both play a relevance to your loan to value (LTV), being how much you are borrowing in relation to the value or purchase price of the property.