10 Mortgage Commandments

mortgage commandments
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Whether you’re ready to buy a new home or you’re looking at refinancing your current home, it’s important to stay compliant with your loan guidelines to get the best rate for your home. Here are 10 mortgage commandments to follow as you prepare for your next chapter.

10 Mortgage Commandments

Commandment 1: Thou shalt not change jobs

This is one of the most important mortgage commandments. As you go through the loan application process, your lender and underwriter are looking closely at how big of a risk you are as a borrower. Sporadically changing jobs right before you apply for a home loan can pose red flags on your account.

Commandment 2: Thou shalt not buy a car, truck or boat unless you plan to live in it

Making any sort of large purchase before buying a home or refinancing your loan also is seen as a red flag. Your lender wants to make sure you’re ready to take on a mortgage loan, and if you buy large items right before you close, it could affect the rate and limits of your loan.

Commandment 3: Thou shalt not max out your credit cards

Credit pays a big role in determining if you’re able to qualify for a loan and if so, at what mortgage rate. It also plays a factor in what type of loan is best for you, so you can see why maxing out a credit card right before you close is a bad idea.

Commandment 4: Thou shalt not close any accounts

Again, credit is important in the mortgage process, and closing accounts can drop your credit score fast.

Commandment 5: Thou shalt not spend your down payment money

Saving for a down payment can take years of hard work. So stash away your savings and don’t use it for anything but an emergency. If you aren’t able to pay your upfront downpayment, you will likely disqualify for a home loan.

Commandment 6: Thou shalt not buy furniture (or anything else) before your loan closes

A lot of times people will buy furniture and appliances on credit cards, which generally is fine, just not right when you’re about to buy a home. Avoid all big purchases and opening lines of credit until after you have the keys.

Commandment 7: Thou shalt not become self-employed

Along the same lines of switching jobs, your lender and underwriter want to see you have a steady source of income. By becoming self-employed, it poses questions to your lender and underwriter about your ability to pay a monthly mortgage.

Commandment 8: Thou shalt not make any large undocumented deposits into your bank account

Any large deposits in your bank account will look suspicious to your lender. If you receive a cash gift to help for your down payment, be ready to show documentation that shows the bank account it came from and a letter signed by your gifter.

Commandment 9: Thou shalt not open/close/change bank accounts

Since you submitted your bank statement to your lender at the beginning of the process, changing bank accounts will cause you to submit many more forms of documentation, as well as complicate the entire remaining home buying process.

Commandment 10: Thou Shalt Not Co-Sign on a Loan for Friends or Family

Any loan you sign you name on means that your credit is attached. By signing for a friend, you have now opened a new credit line. You can see how this could significantly delay or even terminate your home loan process.

You may also like: Breaking Down Your Credit Score

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