For most homebuyers, the financing of their new property is an integral piece of the home purchase puzzle.
Mortgage lenders and buyers work together to complete the loan application, submit documents, prepare the mortage file for the underwriters, get the home appraisal completed, and finalize the loan package.
And while the loan process usually goes quite smoothly, buyers should know that when they are in the midst of purchasing a home, they should avoid making any changes to their "debt-to-income" ratio, job status, credit score, and the amount of cash they have on hand to close on their loan. Buyers could mistakenly put their ability to close on their loan in jeopardy.
Home buyers should not:
1. Change jobs, become self-employed or quit their job: Lenders use a borrower's employment status to qualify them for their loan. Making changes to their employment can throw a wrench in getting to closing. This doesn't mean all job changes would negatively impact the buyer's ability to close. Some job changes could help a borrower qualify- when in doubt, ask the lender before making any moves.
2. Buy a new car or other vehicle: Purchasing vehicles, whether in cash or by taking out a car loan, could change the borrower's debt-to-income ratio and could also change the borrower's credit score. It is usually best to postpone vehicle purchases until after the home closing date.
3. Use charge cards excessively or let accounts fall behind: Home buyers should avoid large charges on their credit cards as this can change their debt-to-income ratio. Also, late payments can result in a lowered credit score which could impact the buyer's ability to close on their home loan.
4. Spend money set aside for closing: Once a home buyer has their down payment money all saved up, they should set it aside and save it for closing.
5. Omit debts or liabilities from the loan application: Lenders will run a full credit check prior to issuing a loan pre-approval and also just before closing on the home loan. Buyers should make sure to fully inform their lender of all of their debts, bank and credit card accounts, and liabilities so there are no surprises right before closing that could put the closing in jeopary.
6. Buy furniture: Home buyers are usually so excited to get into their new home, they want to have it furnished right away upon move-in. Buying furniture, especially if it is rather expensive, can change a borrowers debt-to-income ratio. Just like buying a new car, it is usually best to wait until after closing to buy new furniture.
7. Originate any new credit inquiries: Borrowers should avoid taking out any new loans during the home loan process (unless approved beforehand by their mortage lender) and this includes business loans, car loans, home equity lines of credit, and more.
8. Make large deposits without first checking with the lender: Home buyers often have family members excited to help and excited to contribute to their family member's purchase. Usually, cash gifts from family members are just fine, but buyers should check with their lender first. Usually the lender will need what is called a "gift letter" from the family member who is contributing, acknowledging they want to give the monetary gift and don't expect repayment.
9. Change or add new bank accounts: Many times, banks will offer incentives to their customers to open new bank accounts. When in the midst of a home purchase, buyers should avoid adding, changing, or closing bank accounts or credit lines. If bank account info changes prior to closing, it could delay the closing while the lender reviews that new information.
10. Co-sign on another loan for anyone: Co-signing on loans directly impacts borrower's debt-to-income ratio and it may make it more difficult, if not impossible, for the borrower to qualify for their new mortgage loan.
When in doubt, buyers should ask their lender for advice and avoid making any changes to their financial profile while in the midst of closing on their home loan.
