- YOUR BANK ACCOUNT
1. Don’t deposit cash, borrowed funds or non-payroll checks in your bank accounts.
Underwriters will check all your bank statements for the past two statement cycles and they will require documentation and explanation for the source of every non-payroll deposit. Please do not deposit cash, borrowed funds or any other funds that you can’t prove is yours. If you are getting a gift please contact your loan officer to explain the exact steps for gift documentation.
2. Don’t transfer funds from one account to another until after the loan is fully approved.
Each time you transfer funds from one account to another you will be asked to provide documentation of the transfer so it is best to minimize transfers during the loan process. The only exception is if you need to transfer funds to your checking account to cover the initial deposit to escrow on purchase transactions.
3. Don’t use any undisclosed accounts for the loan transaction.
It is critical that you use ONLY the bank accounts disclosed on the loan application. If you use funds from any other accounts for down payment, closing costs or any other purpose related to the loan transaction the file would have to go back to underwriting and additional documentation will be required.
- YOUR CREDIT REPORT
1. Don’t do anything that may cause a red flag to be raised by the scoring system.
This includes adding new accounts, co-signing on a loan, changing your name or address with the credit bureaus. The less activity on your credit report during the loan process the better.
2. Don’t apply for new credit of any kind.
This includes “You have been pre-approved” credit card invitations that you receive in the mail or online. 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 one to 20 points for one hard inquiry.
3. Don’t payoff Collection accounts during the loan process.
Please consult your loan officer before paying off a collection account. Paying collections will actually decrease your credit score temporarily due to the date of last activity becoming recent. If you want to pay off collection accounts, do it through escrow at closing.
4. Don’t max out or overcharge credit cards.
This is the fastest way to bring your scores down 50-100 points immediately. Try to keep your credit card balances below 50% of their available limit at ALL times during the loan process.
5. Don’t consolidate your debt into one or two credit cards.
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.
6. Don’t close credit card accounts.
If you close a credit card account, you will lose available credit, and it will appear to the credit scoring systems 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.
7. Don’t allow accounts to run past due- Even One Day!
Most cards offer a grace period. However, what they don’t tell you is that once the due date passes, that account will show a past due amount on your credit report. Past due balances can also drop scores by 50+ points.
8. Don’t dispute anything on your credit report once the loan process has started.
When you send a letter of dispute to the credit reporting agencies, a note is put onto your credit report, and when the underwriter notices items in dispute, in many instances, they will not process the loan until the note is removed and new credit scores are pulled. Why? Because, in some instances credit scoring software will not consider items in dispute in the credit score – giving false data to the lender.
- YOUR EMPLOYMENT
1. Don’t make changes to your employment or income.
Employment stability is a big factor in the underwriting process. Quitting or even changing positions within the same company can greatly endanger your loan approval. Inform us immediately of any changes to your job, position or income.