Don’t increase your debt burden. The biggest error borrowers make is that they will file their application, they will be prequalified, they’ll have picked out their home, and they’ll be all excited -- and they’ll go and buy furniture, cars, boats, and they will ramp up their debt. And since credit is often rerun before closing, that additional debt now causes them not to qualify.
Don’t open new credit accounts, even just to transfer a credit card balance. If you transfer a balance to a new zero-interest card, your FICO score will drop because all of a sudden you have more credit.
Don’t challenge the lender’s requests for more documents. Asking “Why do you want to know?” or refusing to provide certain documents may arouse suspicion that you have something to hide. Hand over as much documentation as possible at the start so your application can be considered quickly. Prevarication is pointless because the lender’s verification process will turn up whatever truths you’ve failed to disclose.
Don’t float your interest rate unless you can afford higher monthly payments. If your rate isn’t locked and rates go up, your debt-to-income ratio will change. Depending on the lender’s guidelines, higher payments could prevent you from qualifying for the loan for which you applied.
Don’t change your employment. Right before closing, every lender verifies that the borrower is still employed in the same position. A job change is less likely to derail your loan if you stay in the same industry, expect to earn at least as much income and don’t have a gap between jobs.
Don’t delay payment of your bills or rent. Paying what you owe is important, but it’s not enough. You also have to pay on time. Rent doesn’t show up on your credit report, but most lenders will check with your landlord because rent payments are a good indication of how reliably you’ll pay your mortgage.
Don’t skip your mortgage payment. Some homeowners don’t bother to make what they believe will be their last payment on their existing mortgage, because they know that loan will be paid off when they sell their home or refinance that loan. That’s a huge mistake because a late payment can destroy your credit score. If you need to refinance an ARM that’s scheduled to reset, try to apply for your new loan at least 30 days before the reset takes effect to avoid the higher payments.
Don’t overextend yourself. If your monthly rent is $1,000 but your new mortgage payment will be $3,000, that’s a huge payment shock. All else being equal, your loan is more likely to be approved if the increase in your monthly housing cost is more modest.