What Not to Do After Applying for a Mortgage
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Many home buyers feel a sense of relief after they have applied for a mortgage and have received a pre-approval. At this point, often with a Letter of Commitment, they are off to find a new home. Until the last paper at closing is signed, it is not yet over and there are some very specific things that a home buyer should not do after applying for a mortgage.
- While it is advised to compare mortgages, do not allow your credit report to be pulled multiple times. Inquiries can affect credit scores.
- Do not start using your credit cards to make purchases that will increase your debt. The pre-approval was based on existing debt which gave the lender debt to income ratios used to determine the mortgage amount. Any change in debt can have an adverse affect on the final mortgage.
- Do not open new credit cards or store accounts since these will add to your debt. Lenders look at all open debt even if there is nothing outstanding owed. Also, any increase in accounts can change the credit scores.
- Do not stop making any payments, such as rent or utilities. Payments for debt must continue to be paid.
- Do not purchase a new car or take on a new loan or lease.
- Do not start purchasing furniture, especially if it is being purchased on time.
Any of these can have an impact on the credit score. Even though the lender may have already pulled a credit report, many are now doing so a second time right before the closing of the mortgage. There is no telling if any new credit will appear if another report is requested. Any change in credit scores or history can have a negative affect on the mortgage, the mortgage rate, the closing and can even kill the deal.
In addition, home buyers should not skip having an inspection performed by a licensed inspector. Many mortgages do not require an inspection, however, having one can bring a potential problem or hazard to the homeowner’s attention. An inspection should be considered as important as an appraisal.
Lastly, home buyers should not put off shopping for homeowner’s insurance. Once there is a home sales contract signed, the home buyer should start looking for an insurance agent and getting quotes for insurance based on the sales price. Insurance agents do not need to run a regular credit report as was the case in the past. When the appraisal has been done, it will then be used for obtaining a final quote. In many instances, not being able to obtain homeowner’s insurance or not being able to afford the insurance in a high risk area has destroyed the deal. It’s better to begin this search at the very beginning of the mortgage process.
Obtaining a mortgage is a complex transaction that entails many different factors. For the best results, it is always better to be safe than sorry.
Author Bio: Rosemary has been writing since 2010 for FreeRateUpdate.com, a company that matches consumers with banks and lenders offering low mortgage rates. Previous to her writing career, Rosemary spent 13 years working hands-on in the mortgage industry as a mortgage loan analyst, mortgage processor, property manager, and a mortgage underwriter.
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