Using Credit Once You’ve Applied for Your Mortgage

Despite the relief you might feel after years of saving, on-time payments, and achieving the best-possible credit scores, after you’ve applied for a mortgage isn’t time to change any of your responsible behavior. 

Why? Well, the mortgage approval process isn’t immediate and it’s really a moving target during that period between application and approval. As underwriters go over your history and your mortgage broker takes a closer look at your finances, you still need to be that responsible and creditworthy person you were when you submitted your application. 

Here are some basic tips for using credit once you’ve applied for your mortgage:

  • DO continue to make on-time payments. One 30-day late or missed payment can drop your credit score by at least 100 points. The same goes for lingering collections, so checkup on those old medical bills or outstanding fines and rectify them as soon as possible.
  • DON’T add to existing credit card debt. You’ve found your dream house and plan to sink all your free cash into the downpayment so you need to float some regular bills for a few months on credit. Bad idea. Or maybe you’ve started to daydream about decorating the new place and decide to buy furniture for that dining room you never had before or a new washer. When possible, exercise restraint. Your credit card balances (and amount of free credit remaining) have a high impact on your credit score. You want that ratio of debt to available credit to be as large as possible during the approval process. 
  • DON’T apply for new credit. Though it seems counterintuitive seeing as how we just explained that having more available credit equals a higher credit score, but that’s only in cases of established credit. New lines of credit—no matter how generous—will mean a temporary dip in your credit score. (The thinking is that taking on new credit makes it appear you are living beyond your means)
  • DON’T close unused accounts. That card you worked hard to pay off and now sits responsibly in a drawer somewhere? Keep it there and do nothing with it. While closing it looks responsible (you didn’t need it anyway!) it also lowers your overall available credit, penalizing you for doing the right thing. Just keep it safely in that drawer.
  • DO keep your day job. At least for now. Longer terms of employment improve your odds of approval (and trust us, they will check with HR). Any adjustments can mean salary insecurity or having to start the approval process all over again (delaying it potentially by weeks).

Remember, it’s best to deal with a few months of discomfort during this process than to jeopardize your shot at mortgage approval. Just keep doing what you’re doing and we’re confident that approval will be coming. Reach out if you have any questions about the process

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