Top Dos and Don’ts During the Mortgage Process

In the market for a new home? Here are some tips for what you should and shouldn’t do during the mortgage process courtesy of Frank Approvato of Home Capital Network.

Home Capital NetworkDON’T APPLY FOR NEW CREDIT OF ANY KIND. Including those “You have been pre-approved” credit card invitations that you receive in the mail. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.

DON’T PAY OFF COLLECTIONS OR CHARGE OFFS during the loan process. Paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it through escrow, and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a letter of deletion.

DON’T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account, it will appear that your debt ratio has gone up. Also closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure it is a more recent account.

DON’T MAX OUT OR OVER CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan process.

DON’T CONSOLIDATE YOUR DEBT ONTO ONE OR TWO CREDIT CARDS during the loan process. It seems like it would be the smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above. If you want to save money on credit card interest rates, wait until after closing.

DON’T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.

DO CONSIDER JOINING A CREDIT WATCH PROGRAM. If you join a credit watch program, you can check your reports regularly. If something incorrect does show up on your reports, you’ll know it immediately, and you may be able to take care of the problem before closing. Keep in mind when you pull your own reports, you don’t get “dinged” for a hard inquiry.

DO STAY CURRENT ON EXISTING ACCOUNTS. Like your mortgage and car payments. One 30-day late can cost you anywhere from 30-70 points.

DO CONTINUE TO USE YOUR CREDIT AS NORMAL. If it appears that you are changing your pattern, it could raise a red flag, and your score could go down.

Home Capital Network will go the extra mile to help you get approved. To schedule a complimentary loan consultation, contact:

Frank Approvato
Home Capital Network
(908) 692-0917