Any changes with your money, credit, or employment while you’re in the process of purchasing your home can affect the end result. Limit activity with your checking, savings, investments, and other financial accounts to just normal routine activity. Avoid surprises. Tell your lender if non-routine financial activity is unavoidable so they can assess the situation immediately. Hopefully, it’s not a Homer Simpson moment that can’t be fixed. Your lender can only help if you are open and honest with them.
1. Employment changes. The approval for your mortgage is based on the employment information that you provided to the lender for your pre-qualification. This must be verified during the approval process and confirmed before closing. Avoid making any job changes until after you close on your home.
2. Borrowing money as a “gift” for a portion of your closing funds without documenting the source. If you end up borrowing money as a gift for any closing funds, you must disclose that in writing. It’s better to know if you need to borrow money from the beginning so your loan officer can explain to you how it must be handled. If your loan will allow you to accept such a gift, you may be required to prove who the money came from and how they got it to give to you. Even then, it is at your lender’s sole discretion to accept the explanation or decline the loan. You must prove where you get your closing funds and down payment.
3. Debt to income ratios changes due to new debt. If you make a purchase in which you gain new monthly payments or you apply for new credit whether or not a new debt was established, this will effect your lender’s consideration of approving your loan. Buyers are required to explain all credit inquiries in the 90 days prior to loan application. Wait to make purchases or establish new credit until well after the loan has funded and you have your keys. Did you know your lender still has the right to recheck your credit even after you’ve signed your closing docs? Check with your lender before you make any purchases or apply for new credit during your transaction.
4. Making larger than routine deposits. It sounds like common sense if you’re making large deposits that you’re doing well and can afford the loan your working toward. The lender will want to be sure that the deposit was not a personal loan that you are required to pay back. You will need a written and signed explanation of such activity. Remember, everything must be documented.
5. Making larger than routine withdrawals. Avoid making any big purchases until after you close on your home. The lender is going to want to be sure you haven’t acquired any new revolving debt. If you overextend yourself financially, you may not be able to afford the new mortgage payment. Remember, your loan can be declined at any time.
Is 30-45 days long enough for a stranger to gain your trust? Mortgage lenders like to see stability and consistency which gives them the confidence to trust you and your ability to honor the mortgage you’re requesting. The approval process shows the lender you can plan for buying a home. Your loan officer is there to guide you through the process so that the lender approves your loan. They can help save you from making these common mistakes.
Disclose everything up front to your lender so they can help you avoid blowing your own deal. It will save you time and money. ALL answers you give will be verified through your loan process and checked again at the end. Any changes or misinformation could cause your loan to be denied and all your inspection and appraisal money will not be refunded. Be honest with your lender. They can’t protect you if they don’t know.