6 Things to Avoid After You Apply for a Mortgage

Congratulations on getting this far in your homebuying journey! You've found the perfect house and applied for a mortgage – that's a big step. Whether you're navigating the Central Kentucky real estate market or buying a home elsewhere, this is an exciting time and you might be eager to start planning for your new place. But here's a friendly heads-up: after you apply for a mortgage, there are certain things you shouldn't do if you want the process to go smoothly. Even small changes in your finances can have a big impact on your home loan approval.

As real estate professionals, we at Valor Homes Team have seen buyers inadvertently jeopardize their home purchase by making a few common mistakes during the mortgage process. In our experience as top agents in Kentucky, keeping your financial situation steady until closing is crucial. Below, we'll break down six important things to avoid doing after you've applied for a mortgage – and explain why avoiding them will help ensure you get those house keys without a hitch!

1. Don’t Change Jobs or How You’re Paid at Your Job

Stability is key once you've applied for a home loan. Lenders prefer to see that your employment and income remain consistent. If you quit your job, switch employers, or even change the way you're paid (for example, going from a salaried position to commission-based income), it could raise a red flag. Why? Your loan approval is based on your current income and job status. A sudden change might make the lender question whether you’ll still be able to comfortably make your mortgage payments. It could lead to extra paperwork, a delay in approval, or even a change in the terms of your loan. If a great job opportunity comes up or you absolutely must make a change, talk to your lender before you do anything. Otherwise, try to hold off on career moves until after your mortgage has closed.

2. Don’t Deposit Large Sums of Cash into Your Bank Accounts

Avoid making any unusual large deposits or cash transactions in your bank accounts unless absolutely necessary (and cleared with your lender). When you're in the middle of the mortgage process, lenders are closely tracking your assets and where your money is coming from. A big cash deposit can be hard to document and could make your lender suspicious about the source of those funds. For example, if you suddenly deposit a few thousand dollars in cash, the bank will require an explanation and proper documentation (to ensure it’s not another loan or undisclosed money). This can slow down your loan approval as you scramble to provide paperwork. The best practice is to keep your accounts as steady as possible. If you do need to move money around or deposit a gift from a family member, speak with your loan officer first. They can tell you the proper way to document it so it won’t derail your approval.

3. Don’t Make Any Large Purchases (Like a New Car or Furniture)

It might be tempting to celebrate your future home by buying a new car for that garage or new furniture for the living room, especially if you catch a great sale. Resist the urge! Any large purchase that requires financing or depletes a chunk of your savings is a no-no right now. Here’s why: big purchases often come with big new monthly payments or reduce your available funds. This changes your debt-to-income ratio (the balance between how much you earn and how much you owe). A higher debt load can make you look riskier in the eyes of the lender. In fact, taking on a new auto loan or charging a bunch of furniture on a credit card can sometimes tip the scales so much that borrowers who were pre-approved no longer qualify for the mortgage. The safest bet is to wait until after closing day to splurge on those big-ticket items. Your new car or couch will be much more enjoyable when you know your home loan is secure!

4. Don’t Co-Sign Loans for Anyone

Helping out friends or family is wonderful, but co-signing a loan for someone else while you're in the middle of your mortgage process can spell trouble. When you co-sign, you are essentially taking on that debt yourself – at least in the lender’s eyes. Even if you won't be the one making the payments on the co-signed loan, it will still show up on your credit report as an obligation. This means it will increase your apparent debt load and could raise your debt-to-income ratio. Lenders will assume you might have to pay that loan, which could impact your ability to pay this mortgage. Bottom line: avoid co-signing any auto loans, student loans, or other financial agreements until after your mortgage is finalized and you've closed on your home. It’s not worth risking your own home purchase. Your loved ones will surely understand that you need to hold off until you're in the clear.

5. Don’t Apply for New Credit

While waiting for mortgage approval, you might start getting excited about furnishing your new home or handling moving expenses. But whether it’s a new credit card at your favorite furniture store or an open line of credit for a home improvement project, you should hold off on any new credit applications. Each time you apply for credit, the inquiry shows up on your credit report and can knock your credit score down a few points. Opening a new credit line or financing a purchase will also add to your debts. Remember, your credit score and debt profile were key factors in getting your mortgage pre-approval. If your score drops or your debt increases, it could affect the interest rate your lender offers you – or worse, it could jeopardize your approval altogether. So save those credit card applications for after closing. If you’re dying to buy something, use the credit you already have (sparingly) or, better yet, wait until the home is officially yours.

6. Don’t Close Any Credit Accounts

You might think that having fewer credit cards makes you a better loan candidate, or maybe you want to tidy up your finances by closing old accounts. In reality, closing credit accounts can hurt, not help, your mortgage prospects at this stage. One factor in your credit score is the length of your credit history and the total credit available to you. When you close an account, you reduce the amount of credit available and potentially shorten your credit history, which can cause your credit score to dip. For example, if you have a credit card you paid off and never use, closing it will lower your available credit limit and could change your credit utilization ratio (how much credit you're using versus how much you have total). A lower credit score can influence the loan terms your lender is willing to offer, or even your ability to get final approval. Additionally, if that account (or any bank account) was listed on your mortgage application, closing it now could complicate things – the lender may need to re-verify your assets or credit, leading to delays. To be safe, keep all your existing accounts open and in good standing until after your loan has closed. You can always consolidate or close accounts later, once you're holding the keys to your new home.

Conclusion: The main goal after applying for a mortgage is to keep your financial life as stable and boring as possible. Any blip in income, assets, or credit could raise concerns for your lender. If you're ever unsure about whether a financial move might affect your loan, play it safe – consult your loan officer before doing anything out of the ordinary. By avoiding these pitfalls, you’re giving yourself the best chance at a smooth, on-time closing.

Have questions about mortgages or the homebuying process? Don’t hesitate to reach out to the Valor Homes Team. We’re here to help with any questions you have about your mortgage, the process of buying a home, or Central Kentucky real estate in general. As one of the top agents in Kentucky, our team has the experience and local knowledge to guide you through every step of your home purchase. Contact Valor Homes Team today – we're just a phone call or email away, and ready to assist you in making your Central Kentucky homebuying journey a success!