Your offer has been accepted, you are excited and looking forward to the next chapter of your life in your new home. While going through the mortgage process, you have no doubt been inundated with disclosures, forms and a gambit of other tasks needed to get the process moving and completed. It is important to bring the new Fannie Mae Loan Quality Initiative to the forefront. As the result, lenders are looking closer at credit and performing checks in the final hour even minutes prior to closing.
One small oversight could stop the transaction dead in its tracks. To help you, I have put together a list of 4 things that you should NOT DO no matter what, before closing on your new home. This is also important if you are refinancing your current home mortgage.
The First NO NO – Take a Loan out on a Car
Let’s say you purchase a car days before you closing on your new home. When the lender performs the final check and sees a credit inquiry from the car dealer. They will request a detail of that inquiry on your credit and verify whether or not credit was issued to you for a purchase. The payment will change the qualifying criteria, which may jeopardize and/or change your loan and terms. It is best to wait until the transaction has closed before driving that new car off the lot.
NO NO Number 2 – Apply for a New Credit Card
It seems that every store has a credit card and retailers often offer discounts to customers if you carry their card and use it. Even if the card sits in a box untouched, your credit score and debt to income may be affected by the new card. Again, this may change the qualifications and delay the closing.
The Third – Max Out Your Credit Cards
Yes, another credit card warning. It is understandable that you have a new home and will more than likely want to buy furnishings, appliances, or other goodies; however, increasing your monthly debt may change your approval. Also, do not be fooled by the 1-Year same as cash offers, as the minimum payment will be a consideration.
It is important to point out; your mortgage is based on your debt-to-income ratio and the approval for how much the lender is willing to give you relies heavily on this number. Just because you have been approved by the lender doesn’t mean the deal cannot fall through at closing. Fannie Mae urges lenders to recalculate the debt-to-income ratio before the closing. If the lender see this ratio increase, you loan may be denied.
The Fourth NO NO Point – Changing Jobs
Lenders like to see history and documentation and will perform a final verbal verification of employment to assure that the information on the loan application valid. This verification is done just prior to closing. Should you switch jobs, the history and documentation changes. If moving to a new company, it is likely that you will be required to provide proof of 30 days of employment on your new job.
Another important point is the consideration of switching positions within your current company. If you go from being salaried to an hourly wage or one based on sales and commission, your prior documentation of income may not be usable. If this happens, you may not qualify for the loan amount you did prior to the recalculation.
I hope this information is helpful. If you have any questions or need assistance, we are here to support you every step of the way. Make it great today, whatever you do...