What NOT to Do During the Mortgage Loan Process

• Don’t apply for new credit of any kind.  No credit cards or lines of credit.  No new car loans.  None of that.
• Don’t pay off collections or charge-offs, unless your lender asks you to.  This is a hard one for people to accept.  Generally, paying off old collections causes a drop in your credit score.  When you do, it brings that particular account to the forefront of your credit.  In most cases, the older a ding on your credit is, the less negative affect it has. In many cases, paying an old charge-off makes it new again.
• Don’t close credit card accounts.  If you close an account, it will affect your ratio of debt to available credit which has to be under a certain ratio.  This accounts for 30% of your credit score.  If you really want to close an account, do it after you close on your home.
• Don’t max out or over charge existing credit cards.  Running up your credit cards is the fastest way to bring your score down; it can drop up to 100 points overnight.  You should try to keep your credit cards to below 30% of the available credit limit.
• Don’t consolidate debt to one or two cards.  Again, you don’t want to change your ratio of debt to available credit.  You also want to keep your good credit history on the books.
• Don’t raise red flags to the underwriter.  Don’t co-sign on another person’s loan, or change your name or address.  The less activity that occurs while your loan is in process… the better.

Maria D’Aura, fellow eXp agent, and the Bay Area Real Estate Mom, has excellent advice in her video: Five Things Buyers Should Never Do When Buying A House. (And her daughter is pretty darn cute:)

Do’s During the Loan Process

There are some things you should do while in the loan process:

• Do join a credit watch program. Your bank, credit union or credit card company may be able to direct you to a free credit watch program that can alert you to any changes in your credit report.  This way, if something pops up, you can intervene before an underwriter sees the problem.
• Do continue to use your credit as you normally would. Red flags are easily raised within the scoring system.  If it looks like you are changing from your normal spending patterns, it could possibly cause your score to go down.  Example:  if you’ve had a monthly service for internet access billed to the same credit card for the past 4 years, there’s really no reason to drop it now.  Again, make your changes after the closing.
• Do stay current on existing accounts. Late payments on your existing mortgage, car payment, or anything else that can be reported to a credit reporting agency can cost you dearly.  One 30-day late payment can cost anywhere from 30 to 75 points on your credit score.
• Do call your loan officer. If you receive notification from a collection agency or creditor that could potentially have an adverse affect on your credit score, call your Loan Officer so they can try to direct you to the right resources and prevent any negative reporting to the credit bureaus.