January 7, 2022

4 Things to Avoid When Applying for a Mortgage



Buying a new home is an exciting step in life! Method Mortgage is your friendly roadmap on your home buying journey. To make the mortgage application process flow as smoothly as possible, there are a few things you should avoid before, during, and after applying for your mortgage. These 4 things can negatively impact your mortgage application process and could possibly delay or keep you from buying your new home entirely!

4 Things to Avoid When Applying for a Mortgage

1. Don’t Make Any Large Purchases.

We know that the excitement of purchasing a new home usually has you dreaming of filling it with a new set of furniture! If you are shopping for large purchases before you have applied for a mortgage and even after you have applied for your mortgage, problems can arise later during the mortgage process. 

Mortgage lenders look at many factors during the mortgage application process. The debt-to-income ratio and capital are two of these factors. Financing these large purchases increases your debt and thus your debt-to-income ratio. Changes in your debt-to-income ratio, even after you have been pre-approved for a mortgage can delay or even stop the closing on your new home. 

Paying cash from your savings can also negatively impact the mortgage application process also because you have less capital saved for the future. Lenders like to see capital to reassure them that you are able to pay back the loan. When you make a large purchase using your savings, you are decreasing the capital you have available for the future. This can lessen the confidence that lenders have in you and can negatively impact the mortgage process. 

It’s important that you avoid making any large purchases like these right before or after applying for a mortgage. Making this mistake could cause you to miss out on the house you have set your heart on! Save those large purchases for a little further down the line when you’ve already closed on your new home. 

2. Don’t Co-Sign a Loan for Someone Else.

Co-signing a loan for someone can affect your debt-to-income ratio just like making a large purchase can. Even though you may not be the one making the payments on the loan you co-sign, you’re still ultimately responsible for the payments if they fail to do so. Be conservative and do not co-sign for a loan before, during, or after applying for a mortgage.  Wait until you’ve closed on your new home.  

3. Don’t Apply for any New Lines of Credit.

Each time you apply for a new line of credit, your credit score is impacted and your average credit age is affected. If you apply for new lines of credit right before, during, or after you have applied for a mortgage, it could affect your eligibility for the mortgage or raise your interest rate significantly. If you are planning to use a financing option for any large purchase, wait to apply for it until you’ve closed on your new home. 

4. Don’t Close any of Your Credit Accounts.

Did you know that up to 15% of your credit score comes from the age of the credit accounts you have? The age of your credit history is an influential factor in the mortgage lending process. Lenders want to see that you are responsible with your payments and have a long-standing history of paying your debts. Closing a line of credit can actually lower your score since lenders aren’t able to see the true length of your credit history. Even if you rarely use the available lines of credit, don’t close them out. You want your credit score to stay as high as possible throughout the entire application process. 

Ready to Apply for a Mortgage?

Applying for a mortgage and buying a new home are big steps, and our team here at Method Mortgage can help guide you every step of the way. Get started by clicking our link or give us a call at (205) 705-1650. 

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