Seven Ways to not get a Loan

Change jobs without telling your loan officer

Lenders call your employer a few days before your loan is going to fund to find out if you still work there. If you change jobs during the loan process, you will likely need a pay stub from the new job as a condition for funding the loan. Before you even think about changing jobs, discuss this with your loan officer.

Buy a new car

A couple of times a month I get a loan application from a young couple who wants to buy their first home but has two car loans. As a rule of thumb, if your consumer debt exceeds 10% of your gross monthly income you are endangering your ability to qualify. If you see a new home in your future, live with a used car for a while. If you buy a new car make it a van because you may find yourself having to live in it.

Have no equity

It is difficult to refinance loans at attractive rates when the loan amount is greater than 90% of the value of the property. It is practically impossible to do so when the loan amount is greater than the value of the property. Those 125% LTV loans are sinister. If you are putting down less that 10%, get a loan that you can live with for a while because you may have difficulty refinancing.

Screw up your credit

Do not buy stuff with your credit cards and carry balances for long periods of time. The interest on most credit cards is too high. If you push the balances of your credit cards to their limits, you will seriously impact your credit scores even if you make your payments on time. Also do not be late on any payments. If you do miss a payment throw yourself on the mercy of the creditor and get them to immediately remove any record.

For Homebuyers-hide the money needed for your down payment and closing costs in a mattress until you need it

When you are buying a home, lenders "rules" for your down payment can be surprising. Did you know that almost all lenders require your down payment money to be "seasoned"? By this I don't mean adding salt and pepper to make the money more palatable. Seriously, most lenders require you to have your money recorded on deposit for up to 30-90 days prior to closing your loan to buy your new home. There are special circumstances that may allow you to work around this requirement but be sure to discuss this with your loan officer.                                              -

Decide suddenly to go to work for yourself

One of the most frustrating things about mortgage lending is that it has an inherent "distrust" of the income of self-employed borrowers. Lenders generally want to see a two year history of income for a self employed person. Recently, we were processing a loan for someone who worked for a newspaper. The newspaper reorganized and fired everyone as W -2 employees and hired them back as 1099 consultants. This happened during the loan application process. Our borrower had worked there for 12 years and was now making 25% more but was "self employed" for only 2 weeks. His application was denied for a lack of a 2 year work history. This point is: before you set out on your own, get your mortgage.

Stop making your payments until your loan closes

 Sometimes borrower's have the mistaken idea that because their home is in the process of getting refinanced that they no longer have to pay their bills. Some mortgage brokers encourage the approach that you can "skip" your current months' payments because we can consolidate all of your loans. Do not do this. There can be many unexpected twists and turns while you are in the process of getting your loan on your home. If you stop making payments in anticipation of paying off your creditors with a debt consolidation loan you can endanger your new loan too. This is a fast paced world. Slow payments, of any kind, for any reason, will be reported to the credit bureaus. If you stop making payments during the processing of your new loan you can seriously weaken your ability to get the new loan. Why? One of the last things your new lender will do before closing your new loan is pull a credit grade lowered resulting in a higher interest rate or worse they may decline your loan completely.

Apply for new credit

During the process of getting your loan you may want to apply for new credit to buy furniture etc. This requires your credit to be pulled. Each time your credit is pulled your score goes down. Again this can cause your rate to go higher or your loan to be denied. Wait until after your loan closes to buy that new sofa or get that new credit card.