I am the author of this blog and also a top-producing Loan Officer and CEO of InstaMortgage Inc, the fastest-growing mortgage company in America. All the advice is based on my experience of helping thousands of homebuyers and homeowners. We are a mortgage company and will help you with all your mortgage needs. Unlike lead generation websites, we do not sell your information to multiple lenders or third-party companies.
These tips don’t encompass everything a borrower can do prior to and after the Pre-Approval process, however they’re a good representation of the things most likely to help and hurt an approval.
Ten Credit Do’s and Don’ts:
DO continue making your mortgage or rent payments
Remember, you’re trying to buy or refinance your home – one of the first things a lender looks for is responsible payment patterns on your current housing situation. Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents.
DO stay current on all accounts
Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc). Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.
DON’T make a major purchase (car, boat, big-screen TV, etc…)
This one gets borrowers in trouble more than any other item. A simple tip: wait until the loan is closed before buying that new car, boat, or TV.
DON’T buy any furniture
This is similar to the previous, but deserves it’s own category as it gets many borrowers in trouble (especially First-Time Home Buyers). Remember, you’ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER the loan closes.
DON’T open a new credit card
Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc). Both of these can have a negative impact on your score, and could result in a denial if things are already tight.
DON’T close any credit card accounts
The reverse of the previous item is also true. Closing accounts can have a negative impact on your score (for one – it decreases your capacity which accounts for 30% of your score).
DON’T open a new cell phone account
Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.
DON’T consolidate your debt onto 1 or 2 cards
We’ve already established that additional credit inquiries will hurt your score, but consolidating your credit will also diminish your capacity (the amount of credit you have available), resulting in another hit to your credit.
DON’T pay off collections
Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not. The best rule of thumb is to only pay off collections if absolutely necessary to ensure a loan approval. Otherwise, needlessly paying off collections could have a negative impact on your score. Consult your loan professional prior to paying off any accounts.
DON’T take out a new loan
This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan. Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.
Follow these Do’s and Don’ts for a smoother mortgage approval and funding process.
Just remember the simple tip: wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts.
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