Monday, February 1, 2016

10 Credit Do's and Don'ts to Remember Prior to Getting a Mortgage Loan

By Toni Ryan, Princeton Capital

How can a fully approved loan get denied for funding after the borrower has signed loan docs? Simple, the underwriter pulls an updated credit report to verify that there hasn't been any new activity since original approval was issued, and the new findings kill the loan.
This generally won't happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days. Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.
Why this happens?
It's can be an ugly cycle where by the buyer receives an approval and thinks everything is OK so they make a credit impacting decision (buys new car, furniture, runs up credit card balance).
The lender's Funder pulls new credit report right before they fund the loan to check for changes. The Funder sees the new credit or larger balances and denies the loan.
What do you need to know?
In the hopes of stemming the senseless slaughter of perfectly acceptable loan approvals, check the “Ten Credit Do's and Don'ts” List below to help ensure a smoother loan process. These tips don't encompass everything a borrower can do prior to and after the Loan Pre-Approval process, however they're a good representation of the things that will most likely help or hurt an approval.

1.   DO continue making your mortgage or rent payments
2.   DO stay current on all accounts
3.   DO keep the balances on your credit cards at less than 35%
4.   DON'T make a major purchase (car, boat, big-screen TV, furniture, etc…)
5.   DON'T open a new credit card
6. DON'T close any credit card accounts
7.   DON'T open a new cell phone account
8. DON'T consolidate your debt onto 1 or 2 cards
9. DON'T pay off collections (especially old ones!)
10. DON'T take out a new loan

Follow these Do's and Don'ts for a smoother mortgage approval and funding process.
Just remember this simple tip: Wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts and always consult your loan professional for advice before you make any changes.

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