Q&A Session: What NOT to Do Before Your Apply for a Mortgage

Mar. 27, 2019 |
Author: Atlantic Home Loans

If you’re in the market to buy a home, that means you are researching the criteria that help you improve your chances of being approved for your mortgage loan. With so many I’s to dot and t’s t cross, it can be overwhelming enough without potential life changes rearing their heads long the way. We wanted to lay out some common scenarios along with the advice we’d offer to help reduce your concerns when life happens.

Question: We are looking to buy a home this year, but my husband has a job offer that will make him a contractor, although it’s for more money. Should he consider the job before we are approved for our mortgage?

Answer: Consistency is key when it comes to your income history before applying for a mortgage, so changing jobs is generally not recommended. Further, moving into a contracting or self-employed scenario can complicate matters, so the recommendation is to stick with the salaried position if possible.

Question: How do my current purchases (we just bought a car) affect my ability to be approved for a mortgage?

Answer: Following the rule of you income flow, consistency is key when it comes to the easiest path for loan approvals. Adding a chunk of new debt hits your credit score, and even if you have a stable one to begin, the risk increases for the mortgage company with a potential client who increases their liabilities significantly between new purchases and their potential mortgage. Err on the side of caution here and hold off on the new car buying until you have the new driveway or garage to park it in.

Question: I’ve been told to consolidate my credit before I apply for a loan so I’m looking to close a few old, zero-balance credit cards to help with that. Is this a good idea?

Answer: No, and here’s why. Your credit score is made up of a myriad of criteria, including age of your credit lines and percentage of credit usage. By closing old, zero-balance accounts you decrease your overall credit balance potential, which means you increase your credit usage balance simply by closing those zero-balance accounts. You also truncate the length of your credit history by removing old, good-standing accounts. Be cautious in dropping any old cards before you apply for any loan, if they remain in good standing and aren’t charging you a non-usage fee, they’re helping your credit score, not hurting it.

The bottom line recommendation is slow and steady wins the race to your mortgage loan. Stay the course, and don’t make any drastic changes until you sign the last page of your loan documents.

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Dear Cathy and the Team, I am expressing my appreciation for the home "clearance to close" that was granted to me today.  Your efforts on…