How to Avoid Mortgage Loan Problems at Closing
Congratulations! You have either found the house of your dreams or are taking advantage of low interest rates and refinancing your current home. The closing is only weeks away, and you're feeling pretty good.
It's smooth sailing from here, right? Probably. However, more than one borrower has had the wind knocked out of their sails at some point in a real estate transaction by the mis-steps described below. So as not to affect your mortgage loan qualification, steer clear of the following "NO-NOs" until AFTER you have gone to settlement.
- Do not take on new debt. The temptation is strong. There are so many big purchases that people want to make in connection with a move: appliances, window treatments, furniture, etc. When you add to this the fact that, today, everyone offers easy terms and no money-down- well, why not just do it? ANSWER: Because you will change what the mortgage industry calls your "debt-to-income ratios" (the relationship of your income to your debt). Also, more debt may lower your credit rating. Also, effective with all new loan applications taken on or after 6.1.2010, the lender will order a new credit report the day prior to your loan closing since lenders are REQUIRED to certify that no new debt has been taken out since your first credit report was obtained.
- Do not change jobs. If at all possible, try not to make a career move during the time between your mortgage application and the closing on the home you are purchasing. But you ask, "What if it's a BETTER job, for MORE money, in a DIFFERENT field?" Still, try and wait until AFTER closing. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and may delay your closing.
- Do not pack too soon! Well, go ahead and pack your clothes and dishes but do not pack your bank statements, tax returns, or other paperwork. Most especially, do not pack your checkbook! More than one buyer has had closing delayed while a friend or relative hurried over with additional funds because the checkbook was in the moving van.
- Do not lease a new car. This should go under the general heading of "no new debt." It is highlighted here because, for some strange reason, many buyers do run right out and lease a new car during the time between mortgage application and closing! As with any debt, this will change your "debt-to-income ratios" and may cause you not to qualify for your mortgage.
- Do not independently make Financial Decisions. Paying-off a loan or opening a new bank account may present problems for your loan officer in the middle of a mortgage transaction. Please consult your loan officer before opening or closing a bank account. The thing to remember is that if you are unsure what the impact of a decision will be, consult your loan officer.
Do nothing that impacts your ability to qualify for your mortgage loan or initiates a new round of paperwork. If you have any doubts about doing something that may affect your ability to qualify for your mortgage loan, please consult your loan provider before you do it.
Many buyers seem to view the mortgage application procedure as a static action, a snap shot of their financial lives at a given moment in time. It's not. It's an on-going process that takes into account everything you do right up until the day of closing.
Lastly, due to several new regulatory restrictions to better enable lenders to detect fraudulent transactions, lenders are now required to obtain additional information in this regard.