Homebuyer Financing No-No's

So you’ve finally found “the perfect house” and put in an offer. Hopefully, prior to this, you were pre-qualified. From the time you become pre-qualified through closing, your financial situation is closely examined to determine your level of financial responsibility. And you’ll be asked for lots of information which is carefully reviewed and screened. While life goes on, your financial “picture” should not change throughout the buying process. That said, here are a few no-no’s to keep in mind.

 

Do Not Change Jobs 

Your income amount and pay cycle are both factors in determining your candidacy as a borrower. Your ability to pay your new mortgage is evident by how much you make and how often you get paid. Should that decrease during the homebuying process, it could impact your ability to qualify for a loan. That said, if you’re changing to a new job that offers a similar structure in pay and is in the same field, you’ll likely not have any issues.

 

Do Not Make Any Large Purchases 

While you’re probably thinking of new things for your new home, wait until after closing to make these purchases. You don’t want to have any unusual expenditures appearing on your bank statement or credit report (should you charge your purchases). Your lender is looking at your debt-to-income (DTI) ratio and making a large purchase—whether it’s with cash or a credit card—could raise a flag. A large cash purchase could impact your cash reserves while a large credit card purchase will definitely affect your DTI.

 

Do Not Increase Your Debt or Miss Any Credit Card Payments 

Remember, your loan application is like a snapshot in time therefore your credit should not change throughout this process. Your lender is looking for consistency, so continue making credit card payments monthly as usual and refrain from using your credit card(s). You want to keep your DTI the same.

 

Do Not Change Banks or Make Any Large Deposits 

You want the information you provided on your application to remain consistent. Don’t do anything during the loan process that you wouldn’t normally do. When it comes to making any large deposits, your lender will scrutinize where this money came from and will likely ask you where that money came from. They may even ask for proof.

 

Do Not Apply for Any New Credit, Make Any Credit Inquiries Or Become A Co-Signer On Someone Else’s Debt 

This will definitely change your DTI and ultimately your credit score and possibly decrease your chances of being approved. If it’s something you want to or need to do, you’ll definitely want to wait until after closing.

 

Do Not Spend the Money You’ve Set Aside For Closing Costs 

There’s nothing worse than showing up at the closing table without sufficient funds as it would surely shut down the entire process. Not to mention raise some eyebrows as to why the sudden impact on your savings. It’s best to postpone any large purchases until after closing.

 

Do Not Delay Any Requests For Information From Your Loan Officer 

Your lender will likely ask you for a lot of documents and information. Some of it will be in the beginning, but as they continue through the process, there may be other requests for information. While it may seem tedious, do not delay in responding to their request as this will only prolong your approval and put you at risk of losing out on the property of your dreams. Or postpone the closing date. And if you’re selling a house first so you can in turn buy a house, you don’t want to negatively impact the closing date.

 

BOTTOM LINE 

Your financial “picture” is like a snapshot in time that should not change until after the closing process. Do not do anything out of the ordinary financially, stay in communication with your lender, and respond in a timely manner to any requests for additional information.