What to Avoid When Planning to Apply for a Loan

Mortgage loan button on white computer keyboard

To get the house of our dreams, many of us need to get a loan or mortgage. Getting approval is not as easy as it sounds, but there are strategies you can employ in order to place your best foot forward.

When you apply for a loan, whether it’s a personal loan, auto loan, or housing loan, the lenders will always look for stability, and this is the image that you must project. These are industry practices all throughout the United States. Whether you need a car loan in New York or you want to refinance your mortgage in Salt Lake City, the basic standard is stability.

To keep a stable image, you need to avoid certain actions that may give the wrong impression.

Avoid changes in your job

First, do not resign or leave your job. For most people, their job is the main source of their income and if you belong to this category, it is better to maintain your status quo. The loan officers are very conscious about job stability and it also extends to your payment terms. They are particular on whether you receive a regular salary as opposed to commission since the latter has the impression that it is only given under certain conditions and is, therefore, not reliable.

Avoid making big purchases

When you make a big purchase such as a new car or furniture showcase for the new house, it will be new debt and will reflect as charges on your credit card. If that is the case, it will affect your credit score because you will have a new debt to income ratio. Instead of being initially qualified, the loan officer may think that you have bitten off more than you can chew. That said, they may disapprove your loan or limit the loan to longer terms with a higher interest.

Avoid co-signing with other loans

It may sound like you’re not merciful, but the reality is that when you co-sign, that is already considered a loan against you. Even if you reason that it’s just a formality and the person you co-signed with has definite means to pay, the loan officer will count that as debt.

Avoid changing bank accounts

Your bank account is the main source to track your financial status and habits, aside from your credit card bill. They would want to see a consistent flow of transactions through the course of years, if possible. If you change your bank account, you’re virtually back to square one. It is advised to consult your loan officer before making any changes to your bank account or executing any transfer, to and from your account.

Avoid closing credit cards or credit accounts

pencil erasing credit card debt

When it is often mentioned that having charges on your credit card can adversely affect your credit score, some people would think that closing out their credit accounts would help them increase their score. This is not the case.

Loan officers would appreciate the fact that you have many available credit lines. It is actually advantageous to use your credit card as long as you use them the right way, like only for important purchases. It is also important that you pay off the balance as soon as possible and ensure that it is clear by the time you apply for a loan.

If you will apply for a loan, consider that every financial move you make will be considered as criteria for approval. It is best to be prudent and cautious during these times.

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