Buying a house is exciting! It can be very nerve-wracking too. Until you get through the closing and have the keys in your hand, nothing is for sure. There are ways that you can lose your financing if you are not careful. In order to make sure you have a happy ending with keys in your hand, make sure you don’t do any of the following.
Don’t Change Jobs
Once the lender verifies your income and employment, you do not want to change anything. The lender is basing your income and ability to pay your mortgage on your current employment. Chances are they already verified your income by looking at your most recent paystubs and the last two years’ of W-2s or tax returns. They may have already called your employer too.
The lender uses all of these factors to determine if you can afford the loan. If they know you have stable employment because the lender verified your history of working there for the last 2 years, they are likely using that as a factor in your approval. If you go and change jobs, everything changes. Suddenly your income isn’t reliable and consistent, as it has no history. The job will be too new for the lender to determine if you will succeed at it or not.
If you feel as if you need to change jobs (and it’s in your control), don’t do so until after the closing. If the unfortunate happens and you lose your job due to circumstances you cannot control, then be honest with the lender to see how to proceed moving forward.
Don’t Pay Your Bills Late
You might think that once the lender pulls your credit when you apply for the loan that you are in the clear. Don’t be too sure, though. Many lenders pull credit again right before you close on the loan. They want to make sure that nothing drastic has changed. If they pull your credit and find out that you have not been paying your bills since you applied for the mortgage, it could change the dynamic of your loan. In fact, you might lose your approval.
Don’t Apply for New Credit
Because the lender may pull your credit before the closing, you don’t want to apply for new credit either. Even if you think the lender will never know because it takes a while for the new trade line to show up on your credit, they will know. Anytime you apply for new credit, it immediately shows up as an inquiry on your credit report. The inquiry also has a date on it. The lender will be able to see any inquiries dated after they pulled your credit.
This will raise a red flag. The lender will want to know why you applied for credit. More importantly, they will want to know if you have a new credit line open. This will affect your debt ratio and may make you lose your approval.
Don’t Make Large Purchases
Even if you don’t apply for new credit, you should not use your existing credit lines either. We know how tempting it can be to go buy new furniture for your new house, but it can wait. If you use your credit cards to finance the purchase, you just altered your debt ratio. You now have larger debts out there which take away from your monthly income. This changes the dynamic of the lender’s approval.
It’s best if you wait to make any large purchases until after you close on the home. Basically, anything you cannot pay with cash should not be purchased. Even purchases you make with cash should be made with caution. If you already verified the money in your checking or savings account and you need it for the closing, you should not touch it as it could cause the lender to retract their approval.
Don’t Make Large Deposits
This might seem crazy, but you also have to watch the size of the deposits you make into the account you will use for the loan closing. Large deposits are another red flag lenders look for when verifying your qualifications. They will need to know where the money came from and more importantly, they need to know if it is a loan.
If you have a large sum of money to deposit that is not from your regular income, deposit it in a different account. If you only have the one account, let the lender know about the deposit and keep track of its origination. For example, did you sell stocks or maybe a car? Keep the proof of the sale and receipt of the funds. This way you can prove to the lender that the funds belong to you and that they are not a loan of any sort.
Consider the time right before your loan closing as a time to freeze your financial life. Don’t make any changes that could affect your credit or your bank account. Also, don’t make any changes to your employment. It’s typically only a few months from the time you apply for a loan to the time you close on it, keep everything status quo during that time in order to avoid losing your approval.