10 Rules When Applying for a Mortgage Loan

1. Thou shall not change jobs or become self-employed.

Any changes in job status will require your loan to be re-underwritten. Changing income type from W-2 to self-employed or 1099 will most likely mean your loan will not be approved as a two-year history of this type of income is required.

2. Thou shall not buy a car, truck, or van, unless you WANT to live in it.

Applying for a new loan may lower your credit score because of the fresh credit inquiries. The new monthly payment may also decrease the monthly mortgage payment you can afford which could potentially derail your loan.

3. Thou shall not use your credit cards excessively or let your payments fall behind.

Running up the balances on credit cards and making late payments will lower your credit score. This could impact your interest rate, the cost of mortgage insurance on a conventional loan and your ability to ultimately qualify for the loan.

4. Thou shall not spend the money allocated for your down payment.

If you do not have the funds to write the final check on closing day, you will not be able to close on the loan. This misstep can result in major delays and even loan denial.

5. Thou shall not purchase major household items before closing.

The temptation to start ordering furniture and appliances for your new home may be tempting, but please use every bit of self-control you possess to wait. Large purchases which may potentially deplete your bank account or raise your credit card balances can cause problems in underwriting.

6. Thou shall not allow creditors to make new inquiries on your credit.

As previously mentioned, any inquiries on your credit report can result in a decrease of your credit score. Also, your underwriter could be alerted of any new credit inquiries which will require new documentation to show that you haven’t opened any new lines of credit.

7. Thou shall not make large cash deposits into your bank account.

As part of your loan approval, underwriters must document the source of all funds to be used for your mortgage. For that reason, depositing large amounts of cash which cannot be sourced into an account where down payment or closing cost funds are kept is considered a no-no.

8. Thou shall not change your bank accounts.

Lending rules require a two-month history of any bank accounts to be used for the loan. Opening new bank accounts to hold loan funds may result in closing delays or denials. 

9. Thou shall not cosign a loan for anyone.

Cosigning a loan for someone else means their loan payment will be added to your debt-to-income ratio. This could potentially put you over the debt-to-income ratio limit and result in loan denial. At a minimum, it can cause delays as the new liability must be documented and reviewed by the underwriter and the credit inquiry may impact your scores as well.

10. Thou shall not wait to consult a Gulf Coast Bank & Trust loan officer.

When in doubt about any financial transaction while you are waiting to close on your loan, always consult your loan officer. We are here to guide you along this process and prevent hiccups along the way!