Did you know that your mortgage lender can run a second credit check just prior to closing? Any red flags that your lender notices may disqualify you from the mortgage you were already pre-qualified for.
A red flag warning is something that may affect your credit worthiness. For example, if you purchase a big ticket item before closing, you may be at risk of having a red flag appear on your credit report. Avoiding large unusual purchases before closing can help assure you stay approved.
Your actions after receiving initial approval from your lender can have negative affects on your qualification for a loan. Your lender has the right to re-verify your credit, income, assets, liabilities and employments at anytime. If there are any adverse changes to your status, your lender has the right to revoke your pre-qualified loan.
Below is a list of factors to keep in mind to help you stay approved for your loan:
Credit Score - Checking Credit History
A credit score is a three digit number calculated from your data-rich credit report and is one factor used by lenders to determine your creditworthiness for a mortgage, loan or credit card. Your score can affect whether or not you are approved as well as what interest rate you are charged.
The most common debt-to-income ratio used by lenders is 33/38. This means that your housing costs should take no more than 33% of your income. Adding your mortgage to the rest of your debt should take your ratio to no more than 38%. Any changes to your debt-to-equity may result in disqualification to your loan.
Salaried employees should not have a problem changing jobs of equal or greater income. However, if your salary included bonuses or commissions, you should consider holding off your new job until after closing.
Commissioned employees should not change jobs before closing. Usually, lenders take a two-year average to determine your income when approving your for a mortgage. If you switch jobs, there will be a great deal of uncertainty on your income status which could affect your qualification.
Keep Your Money Stationary
The balance of your liquid assets such as cash, are considered when approving you for a loan. You should avoid any drastic changes to your cash balances. Don’t make large withdrawals, change banks, or close any accounts. This may trigger a red flag from your mortgage lender.