{"id":12567,"date":"2010-04-01T10:56:12","date_gmt":"2010-04-01T16:56:12","guid":{"rendered":"http:\/\/template.lenderama.com\/?p=628"},"modified":"2010-04-01T10:56:12","modified_gmt":"2010-04-01T16:56:12","slug":"ten-credit-dos-and-donts-to-bear-in-mind-prior-to-getting-your-mortgage-loan","status":"publish","type":"post","link":"https:\/\/dev203k.orbitwebx.com\/dev203k\/ten-credit-dos-and-donts-to-bear-in-mind-prior-to-getting-your-mortgage-loan\/","title":{"rendered":"Ten Credit Do\u2019s and Don\u2019ts To Bear In Mind Prior To Getting Your Mortgage Loan"},"content":{"rendered":"

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10 Credit Do’s and Don’ts to keep you from asking this question…<\/p>\n

How can a fully approved loan get denied for funding after the borrower has signed loan docs?<\/strong><\/p>\n

Simple, the underwriter pulls an updated credit report<\/a> to verify that there hasn’t been any new activity since original approval was issued, and the new findings kill the loan.<\/p>\n

This generally won’t happen in a 30 day time-frame, but borrowers should anticipate a new credit report <\/a>being pulled if the time from an original credit report to funding is more than 60 days.<\/p>\n

Purchase transactions involving short sales or foreclosures<\/a> tend to drag on for several months, so this approval \/ denial scenario is common.<\/p>\n

It’s An Ugly Cycle: <\/strong><\/p>\n

    \n
  1. First-Time Home Buyer<\/a> receives an approval<\/li>\n
  2. Thinks everything is OK<\/li>\n
  3. Makes a credit impacting decision (new car, furniture, run up credit card balance)<\/li>\n
  4. Funder pulls new credit report and denies the loan<\/li>\n<\/ol>\n

    In the hopes of stemming the senseless slaughter of perfectly acceptable approvals,we\u2019ve developed a “Ten credit do\u2019s and don\u2019ts<\/a>\u201d list to help ensure an smoother loan process.<\/p>\n

    These tips don\u2019t encompass everything a borrower can do prior to and after the Pre-Approval<\/a> process, however they\u2019re a good representation of the things most likely to help and hurt an approval.<\/p>\n

    Ten Credit Do’s and Don’ts:<\/h2>\n

    DO continue making your mortgage or rent payments<\/strong><\/p>\n

    Remember, you\u2019re trying to buy or refinance your home – one of the first places a lender looks for responsible patters is at your current rent and\/or loan history.<\/p>\n

    Even if you plan on closing in the middle of the month, or if you\u2019ve already given notice, continue paying that rent until you\u2019ve signed your final loan documents.<\/p>\n

    It\u2019s always better to be safe than sorry.<\/p><\/blockquote>\n

    DO stay current on all accounts<\/strong><\/p>\n

    Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc).<\/p>\n

    Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.<\/p><\/blockquote>\n

    DON\u2019T make a major purchase (car, boat, big-screen TV, etc…)<\/strong><\/p>\n

    This one gets borrowers in trouble more than any other item.<\/p>\n

    A simple tip: wait until the loan is closed before buying that new car, boat, or TV.<\/p><\/blockquote>\n

    DON\u2019T buy any furniture<\/strong><\/p>\n

    This is similar to the previous, but deserves it\u2019s own category as it gets many borrowers in trouble (especially First-Time Home Buyers<\/a>).<\/p>\n

    Remember, you\u2019ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER<\/strong> the loan closes.<\/p><\/blockquote>\n

    DON\u2019T open a new credit card<\/strong><\/p>\n

    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).<\/p>\n

    Both of these can have a negative impact on your score, <\/strong>and could result in a denial if things are already tight.<\/p><\/blockquote>\n

    DON\u2019T close any credit card accounts<\/strong><\/p>\n

    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).<\/p><\/blockquote>\n

    DON\u2019T open a new cell phone account<\/strong><\/p>\n

    Cell phone companies pull your credit when you open a new account. If you\u2019re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.<\/p><\/blockquote>\n

    DON\u2019T consolidate <\/a>your debt onto 1 or 2 cards<\/strong><\/p>\n

    We\u2019ve 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.<\/p><\/blockquote>\n

    DON\u2019T pay off collections<\/strong><\/p>\n

    Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not.<\/p>\n

    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.<\/p>\n

    Consult your loan professional prior to paying off any accounts.<\/p><\/blockquote>\n

    DON\u2019T take out a new loan<\/strong><\/p>\n

    This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan.<\/p>\n

    Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.<\/p><\/blockquote>\n

    …..<\/p>\n

    Follow these Do’s and Don’ts for a smoother mortgage approval<\/a> and funding<\/a> process.<\/p>\n

    Just remember the simple tip: wait until AFTER<\/strong> the loan closes for any major purchases, loans, consolidations, and new accounts.<\/p>\n

    _________________________________<\/span><\/p>\n

    Related Credit \/ Identity Articles:<\/h2>\n