Ahhh, pressing pen to paper (or clicking on a digital signature line)…you’ve just purchased a new home. Now that your offer is a contract and you’re on your way to buying a home, there will be a lot of things you’ll need to take care of and get done. More importantly, there are quite a few things you shouldn’t do.
Each of these mistakes are pulled from real life scenarios that we’ve seen happen. Making any one of these can destroy all the hard work you and your agent have put into getting you to this point. Sometimes, they can be fixed, but more often than not, they will scuttle the deal and have your lender denying you faster than you can say “Oops.” Avoid these five mistakes and keep the road ahead clear of obstacles and you’ll be sliding your key into the lock of your front door before you know it.
5 Ways to Destroy Your Home Loan
Make large purchases – As your lender is looking through your file and checking all the figures, this one is a common mistake. You’re excited, you just bought a house and now you need a flatscreen TV for that man-cave you’ve always dreamed about. So you buy it…no big deal, right? To a lender it is a big deal. Although you’ve been approved and the lender is working behind the scenes to make your loan happen, any large changes in your cash reserves and bank account statements will throw red flags to the underwriter. And just because you’re just days away from closing doesn’t change this – every lender performs a pre-close audit to double check all the figures. Wait until you’ve closed and funded before getting extravagant. Best advice? Wait until you’ve received a month or two of mortgage bills to rebalance your budget before making any large purchases.
Credit, credit everywhere – Now that you’ve seen how strong (hopefully) your credit is, you figure now’s the time to think about adding a new car in the driveway. So you hop on down to the local dealer, find the car of your dreams (and it matches the curtains too!) and sit down with the car dealer to talk financing. First thing they do? Run a credit report. Even if you don’t buy the car, that credit check will show up on the lender’s credit report. You’ve just given the lender a reason to worry. Credit checks can lower your scores and in times of tightened lending standards, any movement in your overall credit score can cause a loan to fall apart. Best advice? Don’t open any new lines of credit – cars, store cards, or credit cards and don’t spend on credit during the closing process. The more you can avoid this, the better your chance of closing on time.
Late payments – It goes without saying that you should pay your bills on time. You always should and if you’ve been approved for a home loan, you’ve probably done well at it so far. Don’t mess up your closing by suddenly changing course and paying a few bills late here or there. Best advice? Simple – pay your bills and pay them on time.
Make too much money – This one might sound a little odd, since more money is better usually, but any large deposits into your bank accounts can trigger more investigation by the lender and hold up closing. Where did the money come from? Why are you receiving it? By the time you’ve signed a contract and have moved through the basic approval process and into underwriting, anything – negative or positive – can affect your loan. Don’t give the underwriter a reason to take a second look at your file and ask more questions. The more questions, the more paperwork, the more time, the more chances things can go wrong. Best advice? Speak with your lender about any money you might be receiving – even gifts from family members prior to the loan application process. They will be able to guide you on what you should and shouldn’t do. Try to freeze-frame your current standing financially (using the above advice as well) and give the underwriter the same picture of you on day one as they see on the closing day – deviating from that too much in any direction can cause you trouble.
Lose/change your job – No one chooses to lose your job, but it does happen. If you lose your job consult with your lender immediately. If you’ve been eyeing a job change, you should also let your lender know. Best advice? Stay put if you can and don’t make any sudden changes (do you see a theme developing here?). No one can avoid losing a job, but it never hurts to stay on the bosses good side while you’re heading toward closing.
By avoiding these five mistakes you can help make your closing smooth and comfortable for you. There is nothing more frustrating for home buyers than dealing with an underwriter who needs red flags cleared up. The minute you go under contract for a home, remember to keep your finances in order…the same order when you applied for the loan.
Thanks to Linda Rudd with Legacy Mutual Mortgage for the inspiration for this post during our office meeting.
image courtesy of haldean