What NOT to do During the Mortgage Process

The mortgage process is very specific, so it goes without saying there are do's and don'ts when it comes to successfully closing on a mortgage.

The credit report expires 90 days after it is originally pulled, so if it expires, a new one has to be pulled. If the credit score is now lower, that is the score that will be used, which could change the interest rate for the worst. If the score is below the minimum required credit score the loan has to be denied unless it can be brought up before closing. Here are the main reasons credit scores might drop in that 90 day period:

- Credit card debt increases

- Late payment on something

- Medical collection shows up unexpectedly

Your employment will be verified at the beginning of your mortgage application and again at the very end before you close. Do not quit your job, even for a better job if you have a contract to close on a house, talk to me first so we can get it figured out. Do not do anything to get fired, like eating lunches from the office refrigerator that are not yours, or getting in a fight at work, one of these two things have actually happened on one of my mortgage files. Sadly the borrower did not get the loan because he no longer had a job, this was the week of closing, and the seller was furious we did not close escrow. Leaving your job is a serious matter when you are applying for mortgage, and when you are trying to buy a house your source of income is imperative. I am always available to answer questions about employment if there is a concern.

Do not apply for other credit, such as a car, credit card, or any new debt. A popular one I have encountered is buying furniture for 90 days or more same as cash. This can have a majorly adverse impact on the credit score, the reason is due to a high credit utilization ratio. For example, if you purchased furniture for $5,000 and received 90 days same as cash, this is likely set up as a revolving line of credit with a limit of $5,000. With $5,000 available and $5,000 as the balance the credit utilization ratio is 100%, which will severely impact the credit score. In this scenario it could drop a score as much as 100 points depending on how much other revolving credit a person has.

Do not make any unusual large deposits into your bank account, an unusual deposit is any deposit that is not a payroll deposit. All deposits need to be sourced with a paper trail, such as a bill of sale if you sold something, all money must be documented to make sure it was not borrowed, it has to be your money, and you have to verify that.

While I am at it I have a very important recommendation, always pay rent with a check, paying rent with cash is a bad idea because it provides no record of when rent was paid, or how much was paid. Being able to show 12 months of cancelled checks is important, not always required, but if it is necessary you need to have the documentation. If you pay cash and can show ATM withdrawals on your bank statements every month that can work as well.

Have a mortgage or credit question you would like for me to cover on this blog? Shoot me an email so I can address it. If you want to apply for a mortgage in Arizona give me a call at 480-203-4641, the application process is easy, and it only takes 10 minutes for me to get the information to get you started on your way to home ownership.

Patrick Ritchie
Mortgage Finance Instructor

Ritchie School of Real Estate Finance

480-203-4641 Cell
Patrick@PatrickRitchie.com

NMLS# 276438 AZ#0913109
Click Here to go to Patrick's Mortgage Website