What Should You Avoid Doing Before Applying For A Home Loan?

Applying for a home loan is a significant event in life. It is something you must prepare for, and it is something that requires a lot of evaluation. Therefore, it is helpful to know what to avoid doing before you apply for a home loan. When you know what to avoid, you can protect your finances and credit during this time and improve your chances of getting approved. Here are four things you should avoid before you apply for a mortgage.

Switching Jobs

You should never switch jobs before getting a mortgage loan. You can safely do this after you close on the loan, but you should avoid it before getting the mortgage. Switching jobs can jeopardize your ability to get approved for the loan. Lenders look at job history, and they like seeing a two-year record with the same company. If you switch jobs, the two-year period starts over.

Taking Out a New Loan or Increasing Your Debt

Taking out a new loan or increasing the debt you owe is another thing you should avoid. Taking on more debt changes your debt-to-income (DTI) ratio. This ratio is essential for qualifying for a loan. Your DTI ratio increases when you owe more money, so taking on new debt is not a positive thing to do before applying for a loan. The better choice is to pay off some debt. You can decrease your DTI ratio by choosing this route.

Spending Money From Your Savings Account

The third thing to avoid is spending money from your savings account. Lenders look at the amount of money you have on hand when analyzing your loan application. Your net worth decreases when you take withdrawals from your savings account unless you are transferring the money to a different account. Therefore, try not to spend any of your savings before applying for a mortgage.

Missing a Payment

Finally, you should avoid missing payments on your debts. If you miss one payment on a bill, it can appear on your credit report as a derogatory item. Derogatory items on your credit report drop your credit score. The goal of preparing for a loan is finding ways to increase your credit score, but a missed payment will do the opposite.

Avoiding these four things can help you protect your finances before applying for a mortgage. You can contact a mortgage lender if you are ready to begin the application process.

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