Buyers commonly do things that jeopardize the safe and timely close of their mortgage loans. The "don't do" list includes several things that adversely impact credit scores. Lenders increasingly use credit scores to assist in mortgage credit decisions including: loan approval, loan pricing, and loan product availability. So, pay close attention to the following list. Buyers should never do any of the following between the initial loan application and closing escrow.
1) Don't forget to make the payments on any of your present loans or credit cards. This is obvious, but there's a lot going on once you start the process and once in awhile it happens – in the rush of events you forget to make a payment. And since credit reports have a normal 120 day shelf life, it is quite likely that an updated report will be necessary before finding and closing on a house. If a late payment shows up, this can put the loan (and escrow close) in jeopardy.
2) Don't fail to inform your loan agent of any changes to the transaction. Last minute changes such as lender holdbacks, seller credits or required termite work can create havoc with closing dates.
3) Don't quit or change your job. Lenders are likely to call your employer just before the loan records to verify you're still there. If you aren't, the lender will stop the loan from recording.
4) Don't leave town without leaving a contact phone number until all loan approval conditions are met. You may be needed for a decision or to provide additional documentation.
5) Don't consolidate credit card debt from several cards into one. A new card with one balance at the limit GIVES a lower credit score than three cards, each with balances below the limit.
6) Don't sell stock for down payment without keeping a record of the liquidation. Same reasoning as 7) above.
7) Don't move money designated for down payment from one account to another. This creates confusion. If you move funds, advise the lender in advance and keep a detailed paper trail.
8) Don't file for divorce. Once you file for divorce, most lenders will not make a mortgage loan until the final decree, setting forth settlement terms, is recorded.
9) Don't incur any new debt. This increases your debt-to-income ratio, potentially reducing the amount you can borrow. It can also lower your credit score because new debt has a negative impact on credit scores.
10) Don't respond to "you are pre-approved for a credit card" mailings. A credit inquiry might result, and thus the same impact as 11), above.
11) Don't even go shopping for a car, not to mention, don't buy one. If you must visit the showroom, don't give your social security number to anyone. This enables the dealer to check your credit. Each credit inquiry lowers your credit score even if you do not buy a car.