The mortgage process is a tricky endeavor, aside from digging into the last several years of your life and financials, they will continue to monitor your financial status up until close.
Many people don’t realize this, and a good loan officer will let their clients know how important it is to follow the following 5 rules:
Rule # 1 : Do not add additional debt or charge excessive amounts on your existing lines of credit!
This is often the most common error that clients come across. Buying a home is exciting, you need new curtains, paint, furniture and who knows what else. But how are you going to pay for these things?
This is where most people go wrong, they go to a retail store and immediately open up a credit card to purchase the aforementioned items. But now you have an additional debt, and the lender is monitoring this, they know know you’ve opened up a new line of credit and they will require you to prove how much the monthly payment is. Now typically it’s not a big payment and most people can manage the additional $25 in their debt to income ratio. But the main problem is that these card statement do not come for a month, and if we need to prove the payment how are we going to do that? You can usually go online and start an account, but it might be up to date and show your true balance. These are the things that cause problems and delay a closing.
How to Fix this problem:
Pay cash if you can, don’t open up a store card, put the items on lay away or just wait. Believe me, it’s worth waiting if it’s going to delay your closing.
Rule # 2: Do not Change Jobs!
This one is another primary cause of delayed closings. When you are applying for a mortgage, they are loaning you a significant amount of money, they want to ensure that you can pay it back based on your current earnings and debts. So if you decided to take a new job that pays .25 cents more an hour, you should still qualify but they have to prove that you are now working at this new job.
So a first paycheck will be needed, a verification of employment will be required from the new employer. First paychecks sometimes do not come for 3-4 weeks after you start working. So you could see how this might delay your closing.
How to fix this problem:
Do not change jobs in the middle of the loan process, if you have an opportunity to take a new job at a higher pay rate, ask them if they can wait until you close on your house. Most employers would understand.
Rule # 3 : Provide documentation in full and quickly as possible
The lender will need a variety of documents from you, taxes, W2’s, 1099’s , pay stubs, etc. It is important that you get these to your loan officer as quickly as possible to ensure they have sufficient time to process everything and meet your closing date. There will be additional items the lender needs that “pop up” throughout the loan process, so it’s important to keep a steady line of communication with your loan officer and get them the items quickly.
Rule # 4: Do not charge excessive balances on your existing lines of credit!
This goes back to rule # 1, do not charge expensive items on your existing credit cards or lines of credit. If you purchase too much at 1 time it will raise your minimum payment and the lender will be notified that a new payment is in effect. We will now need to prove this new payment to ensure your debt to income ratio still works.
Rule # 5: Make all your existing payments on time
This happens more than you think. In the midst and frenzy of applying for a mortgage, moving, arranging help, communicating with your loan officer, you suddenly forget to pay that monthly credit card bill, or your car payment is a day late.
It happens to everyone, but in the middle of a mortgage loan it could be a death sentence. It is recommended that you put all your bills on auto pay, even if it’s just for a short period of time during this process. Most likely you will be paying your mortgage this way as well.
The lender does a “soft pull” on your credit within 10 days of closing, this is to see if there has been any additional debt opened up or significant debt added. It also shows how your existing lines of credit are being handled. If you missed a payment it will show at this time, and your credit score will probably have dropped. This could be the difference between qualifying and not.
How to fix this problem:
As mentioned, try and put your bills on auto-pay, even if it’s for a short time. You can ensure you won’t be missing any payments during this process; and you might come to find you enjoy the ease of not worrying about it.
If you think you might be in a position to buy a home, or if you have questions about anything mentioned in this article (or any of these articles) Find out if you qualify, or what current rates are by clicking the link below:
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