10 Things That Will Put Your Mortgage At Risk
Hello FOGA Readers!
Buying a home is hard! First, you go through all the work to save money to purchase the home. Then, you spend time and energy going out with an agent to look for homes. You like some, lose out on others, and then finally you put an offer on the home you want. The seller accepts, and you are on top of the world. Now, the real work begins.
Getting a mortgage can be a seamless process, but it can also be a pain in the ass. You send in documents multiple times. There are countless papers for you to sign, and then there’s always something else needed at the end of the day. Plus, you have to get everything back quickly (within 24 hours). Even with all that, the process will get done, and you will be well on your way towards moving into your home.
That is unless you commit one of these mistakes. Then all of a sudden all your hard work falls apart, and you lose not only this home but other potential homes as well (within the next few months to two years). Why? Because you can no longer qualify for the mortgage.
You may not have known that these were risky moves on your part, but now you will. Here are the 10 Things That Will Put Your Mortgage At Risk.
1. Changing Jobs
Since most people would need a job in order to pay a mortgage, it’s fair to say that lenders and banks will be looking to make sure you have a stable work history. Simply put, this is not the time to change careers. If you are considering leaving your field of work, do so after you buy your home.
If you receive a large amount of/your paychecks are entirely commissions/bonuses, or you are self-employed, this rule goes double. Switching careers at this point could mean that you no longer qualify for a home for at least two years. Why? You are no longer stable.
In my case, when my job was pulling all its bullshit, I contemplated leaving. The problem was that if I quit, we would lose the house. Even if I worked in the same industry, we would have had to wait until I had two years working in my new job to try to purchase a home again.
2. Buying a Vehicle
I used to think this was a no brainer until I started working in real estate full time and learned differently. So, I will say it here: Do not buy a new car, boat, truck, van, RV, motorcycle, plane, or hovercraft.
When you buy a car, they pull your credit. Depending on where your credit is, this could end your plans immediately. If your credit is excellent then that’s fantastic. However, if you have any amount of debt, your new monthly payment is added to your overall debt to income ratio and that may make you unable to qualify as well.
Also, if you are buying new construction and you do this, they will more than likely keep your deposit (they may do it on a resale home as well). Why? Because this was a stupid move and every lender warns against it.
3. Spending Money Set Aside for Closing
This is a no brainer, but you would be surprised at how often it happens. If you need $10,000 in order to close on your home, then please do not spend the $10,000 you need to close on your home.
If you don’t have the money to close, you don’t get the house. It’s as simple as that.
4. Using Credit Cards Excessively
When you are trying to get a bank/lender to loan you well over $100,000, you do not want to prove that you cannot handle money. If you go from reasonable credit card balances to maxing out all your credit cards, that is a huge red flag.
Plus, constantly using credit cards (beyond what’s normal) increases your debt to income ratio as well. You will want to stick to low credit card balances while you are working on getting your mortgage approval.
Think if it was you. Would you loan even $1000 to someone when you know that he/she already have thousands in debt on credit cards they aren’t paying off? That’s how the bank/lender will look at it.
5. Making Late Payments
You know the best way to make a bank/lender comfortable with loaning you over $100,000? By making a late payment on your credit card. Wait. Something’s wrong with that scenario.
If you are making late payments on anything, no bank/lender is going to want to loan. You can’t even pay what you have now. How in the world are you going to be able to have a mortgage?
The late payments have a lot of consequences as it is. Don’t let your future home be one of them.
If you do have late payments currently and are about to look for a home, the first thing you should do is speak to a bank or lender and see if it’s possible right now. Once you have done that, you will know how to proceed from there.
6. Buying New Furniture
This furniture is from Haverty’s.
A lot of people make this mistake. You’re buying a home! Obviously, you will need furniture to put in it. An empty house sucks.
Most people buy furniture by opening a credit card at the store of interest and getting 0 down for a certain amount of time. The problem is that opening a new credit card, is pulling your credit. This will lower your credit and as we have already learned, that is bad. Also, it will increase your total debt, which means your debt to income ratio will go up. Bad again.
Now, if you are buying your furniture with cash and you speak to your bank/lender and let them know what you are doing, you should be fine. As long as you are not spending money set aside for closing (back to number 3). We did this with our furniture, and it worked out okay. 🙂
7. Initiating Inquires Into Your Credit
As I am sure you have noticed in number 2 and number 6, messing with your credit is just a bad idea right now.
Anytime you make an inquiry into your credit, they pull your credit, and your score goes down. That is not what you want when you are buying a home.
A good rule to follow: If you need to give your social security number, they are probably going to pull your credit. Just wait until after you are in your home to do it.
8. Changing Bank Accounts
You are now creating more work for yourself and the bank/lender.
When you are trying to get a mortgage, one of the things the bank/lender will request is two months/60 days of bank statements. If you switch banks during that process, you may have to wait until you have two months/60 days of statements at your new bank. Plus, you’ll have to provide all the documents showing the path the money took (leaving the previous bank and getting to the new one).
Not every seller is going to wait for you to get your financials together to buy the home. You will probably lose the house.
Better and easier to wait until after you close to change any bank accounts.
9. Making Large Deposits Before Checking with Your Bank/Lender
When you are trying to get a mortgage, the bank needs to be able to source all of your income and deposits. If you get a random $1000 in your account, they will want to know where it came from and why. If it cannot be sourced, it cannot be used and that will cause problems.
The whole process of getting you qualified for a loan is proving that you can afford to pay for it. If you are getting random deposits that a bank/lender cannot trace, that comes into doubt.
If you are receiving a gift or help from a family member, you would want to talk to your bank/lender about the specific way they want you to do that and the documents you will need to provide.
You will want to avoid depositing any cash that you have in your home during this time. Wait until you have closed on your home.
10. Co-signing on a Loan for Someone
When you co-sign for a loan for someone, you sign on for the financial risk as well. This increases your debt to income ratio which can now screw up you buying your home. Also, this will cause a pull on your credit (back to number 7) which will lower your credit score. That could affect your mortgage approval as well.
Lastly, if the person you co-signed for stops paying, your credit takes the hit and you may need to pay the loan to keep it from ruining your credit. It’s a big sign of trust to co-sign for someone, and it can help them tremendously, but it’s not something that you need to do while working on buying your own home.
In Summation
Those were 10 Things That Will Put Your Mortgage At Risk. I have seen them happen many times (often multiple things at once), so if this helps one person get into their home, I will have made the world a better place. 🙂
If you are buying a home and you are in doubt about anything, just ask the bank/lender and they will take care of you. They want you to get into your home as well.
So, what did you think of 10 Things That Will Put Your Mortgage at Risk? Love it? Hate it? Let me know!
Until next time!
-Ms. FOGA
I think this is all great advice. I hope you don’t mind me saying that I think the title would be better if it was adjusted slightly. I feel like this post is more about a mortgage application than a existing mortgage, as I read the title in the email.
I would love to see a similar post on threats to an existing mortgage.
Thanks a really good point! I will change the title once I get back from vacation. 🙂
As far as existing loans, the main issue you can have is not paying it. You don’t have to worry about most of the above since you already have the mortgage. Also, not paying your taxes, insurance, or community fees would have big consequences as well.
Thanks for reading and the suggestion!