Southern California Credit Mistakes To Avoid

Bad Credit or Good Credit

If you are thinking about buying real estate in the near future, there are particular things that you should avoid doing as they will affect your mortgage options. The following are Southern California credit mistakes to avoid.

Southern California Credit Mistakes To Avoid

Large Expenses

Lenders review your debt to income ratio. Making large purchases on either your credit cards or with new loans can significantly change that percentage. Usually, the higher your debt, the less you can qualify for on a mortgage. This is particularly important after you have submitted your official mortgage application. Mortgage companies may re-run your credit report shortly prior to closing to ensure that nothing has changed. If you took on additional debts, this can cause issues with getting the mortgage.

Changing Employment

As part of the loan process, mortgage companies look at your past and current earnings to evaluate your ability to make payments. Consistency in employment is very important. Changing jobs prior to or during the approval step may cause problems with qualifying for a loan, especially if the new job is in a different line of work or provides less pay. During the loan process, it may also lead to delays while the new employment is confirmed.

Moving Banks

Loan underwriters typically review your bank account history over the last few months. Transferring funds to a different account may cause issues. It is advisable to leave funds in the current place until the closing completes.

Large Cash Deposits

Many types of loans mandate that you use a specific amount of personal money for the down payment and/or settlement fees. Mortgage companies confirm this by reviewing bank statements. Any cash deposits are closely reviewed. You may be asked to provide details on the source of those deposits.

Shutting Down Accounts

While preparing to purchase a home, you may decide to diligently pay off credit cards. Prior to doing this, consider speaking with a mortgage professional on whether it is required based on your financial standing. If you do pay off bills, do not terminate the accounts as this may affect your credit rating. It may be better to leave the accounts up without a balance.

Additional Guidance on Southern California Credit Mistakes To Avoid

The above Southern California credit mistakes to avoid covers just a few examples. As a local real estate professional, I can provide you with a list of local lenders in the Southern California area. You may reach me, Matthew Rapoport, at Homes Inc. via phone at (213) 334-4141 or email at [email protected]