Ten Obstacles to Avoid When Closing Your Loan
The mortgage process can feel like a marathon when you want to sprint to the finish. You bring in the correct documents, have all your ducks in a row and found the perfect home for your family. Now is the waiting game, but what you do not want to do is set yourself up for any difficulties as you wait for all the processes to be completed. Here are ten things you have to try to avoid when closing in your next home.
1. Large Item Purchases
One of the first things we tell buyers in the process of purchasing a home is to not purchase any big ticket items. These purchases can alter your debt-to-income ratio and impact the timing of closing in on your home. These purchases include cars, boats, large furniture or other high end items that might need you to tap into your credit. With these purchases, simply pause on the purchase until after closing and stick to your budget. The one thing you do not want is a delayed transaction and grumpy parties on both sides of the transaction due to that delay.
2. Job Changes
Job changes can be an exciting time for anyone, unless you quit of course. Both, however, can cause significant impacts to your home loan qualification. If the plan is to make a move to a new career path, or if you happen to need to quit your job for any reason, try to plan to do these things after you close on your home. Many employers are understanding of the circumstances.
3. Credit Change
Avoid opening or closing credit lines while in the process of buying your home. Opening new cards create hard inquiries on your credit report, and closing credit lines may increase your credit utilization. Either one of these could lower your credit score and potentially change your interest rate or home loan qualification which are huge in the midst of a transaction.
Avoid changing bank accounts or moving large sums of money around. Underwriters often need bank statements and records in order to approve your loan. Changing banks can mean needing to provide all new statements, and can delay closing.
5. Ignore Questions
Answer all questions from your loan officer, yes even the questions that sound silly. Your loan officer is gathering information and documentation from you that is vital to your home loan closing. Ignoring requests from your loan officer or loan processor could cause closing delays.
Do not pay bills late or have any bills get sent to collections. Even one late payment can have a major impact on your credit score, and even after the payment has been made it still takes time for your score to rebound. This change in your credit score could have a negative impact on your rates or home loan approval, so it’s very important to be extra vigilant and avoid any late payments prior to closing.
7. Credit Checks
Do not let anyone other than your loan officer run a credit check on you. Many credit checks create hard inquiries on your credit report, which can lower your overall credit score. This can alter your rates and home loan qualification, so it is best to avoid any credit checks until after your home loan has closed.
Do not sign or cosign on any other loans during the mortgage process. Obligating yourself to a different loan prior to closing affects your debt to income ratio. Even cosigning for someone else means you are still liable for the payments on this other loan. The best-case scenario is that your loan officer will need additional documentation for you regarding this new loan, which could delay closing. The worst case is that this new loan would negatively impact your debt to income ratio to the point where you no longer qualify for your home loan!
9. Avoid Large Deposits (Other than your paycheck)
Mortgage Companies are required by federal law to look into large deposits, so any unusual large bank deposits often need a written explanation and this could delay your home loan closing.
10. Payday Advances
Do not take an advance on your salary. This can alter your payment schedule which might hinder your home loan approval.
We are here with you from beginning to end and want you to get the keys to your next home. We hope these red flags are something you can make sure you avoid if you happen to be working towards closing on your next home. If you have any questions, please call 909-335-0430 for more information and we are more than willing to help you gain more knowledge of the mortgage process in general.
Credit: First Home