5 Mortgage Don’ts

When it comes to applying for a mortgage, there are many things you need to do. You may also want to keep in mind these five mortgage don’ts:

1. Major Job Changes…
Finding a new job or becoming your own boss is the ultimate dream for many — until you realize it could complicate the process of proving your new income for a loan application.

Many lenders would like to see you in a new position for six months before considering a loan, and a self-employed borrower’s income is documented not by recent paystubs, but by tax returns submitted to the IRS. It may take two years or more to establish an earnings history for a new business.  Discuss the situation with your lender before you consider any employment changes to understand how that may affect your loan decisioning.

2. Overdraft on your checking account…

Those annoying overdraft fees might seem like a tiny hiccup to you, but to your lender this may spell T-R-O-U-B-L-E... If you’ve received an overdraft notification in the six months prior to applying for a mortgage loan, be sure to tell your lender before they discover it. It’s easier to explain the error rather than hope it goes unnoticed.

3. Applying for new credit…
Carefully consider opening new lines of credit, obtaining new loans or moving large amounts of money around, in any way, shape or form if you intend to apply for credit soon. At a minimum you may have to provide an explanation about these types of events. It could also delay the loan closing or worst case cause your mortgage application to be declined. Bottom line — consider delaying buying that car until everything for your loan is final.

4. Ignoring small bills…
Make sure you have all your bases covered when it comes to your bills. You might be feuding with your internet provider over an extra charge, but it’s best to pay it now and work on getting a credit to the account later. A small collection item or late payment may affect your credit score. Pay all your bills promptly, whether you think there is an error or not – a small extra charge isn’t worth the risk to your credit history.

5. Not filing tax returns
Taxes — they’re the worst, right? Well, disliking them is fine, but don’t forget them entirely. You need those IRS tax transcripts looking pristine (and submitted on time) to apply for your home loan.