After years of scrimping and saving and dreaming, you’re finally ready to buy a home. You’ve also applied for a home loan, and things are looking favorable – like you’ll get that mortgage loan and that new home. So don’t blow it now. There are in fact some things you could do to reduce the amount you’re eligible to borrow or even your ability to borrow at all. Read on, then, to discover the 3 things you shouldn’t do after applying for a home loan in Atlanta.
1. Change Jobs
One important thing you shouldn’t do after applying for a home loan in Atlanta is to change jobs. Sometimes this is out of your control, but when it is within your control, you shouldn’t do it. A career change will likely mean an income adjustment and a resulting change in the amount you’re approved to borrow, usually downward.
An important part of applying for a home loan involves proving a track record of consistent and stable employment. And a job change can create problems, especially for those who move from a salary-based job to commission. You can bet your lender will keep track of the source and amount of your annual income.
Typically, lenders want to see at least two years of continuous employment with the same employer. And here are a few points to keep in mind with respect to changing jobs . . .
- If you move from one job to another very similar job with equal pay – say, from one accounting firm to another – you may be okay.
- If you move one field to an entirely different field – for example, from accounting to construction – you may have to work in that new job for two years to be eligible for a home loan.
- Switching from a job to self-employment will very likely disqualify you.
2. Make or Finance Large Purchases
You should also avoid making any large purchases after applying for a home loan, whether with cash or by means of financing.
It’s tempting when you’re on the verge of buying a new home, to want to buy new furniture and appliances for that home. But even making any large purchases like these with cash could hurt your chances of getting the loan. Such a cash purchase will deplete your saving and hurt your ability to make the down payment and pay closing costs. And your lender will take note of that.
And you should definitely avoid financing large purchases. Charging big purchases will increase your debt-to-income ratio and credit utilization – two of the primary metrics lenders use to determine your eligibility to get a home loan and the amount you can borrow.
So don’t buy a new car or new furniture for the home. Your lender will be sure to find out because lenders routinely perform a pre-closing credit screening check.
3. Apply for New Credit or Max Out Credit Cards
Similarly, you should avoid applying for new credit or maxing out your credit cards after applying for a home loan in Atlanta. Either of these can put you in a position such that you’ll be able to borrow less if any at all.
As we just mentioned, your lender will check your credit prior to closing and can in fact do it at any time before closing. Applying for new credit can impact your credit score, often negatively. And taking on more debt will increase your debt-to-income ratio.
Don’t max out your credit cards either. This is additional debt that will lower your credit score, which will qualify you for less financing and likely increase the cost of your loan. Here are some points to keep in mind . . .
- It’s not actually the amount you owe that matters for credit scoring. Rather, it’s the amount you owe relative to your credit limits, and maxing out your credit cards puts you in a worse position here/
- Nearing your credit card limits, because it lowers your credit score, will cause you to get a loan with higher rates and so higher monthly payments.
- For better rates and terms on your home loan, experts advise keeping your credit usage below 30% of your total credit limit.
What You Should Do After Applying for a Home Loan
These are the main things you shouldn’t do after applying for a home loan (though there are many more), but there’s still more to consider. After you’ve done everything right credit-wise, you will still need the help of an experienced Atlanta agent to get the most home for your money. And, really, you shouldn’t wait till after applying for a home loan in Atlanta to find a good agent, so contact us today at (404) 977-5054.