Let’s say you are currently under contract on your new home and your home inspector gave it a great report. You will be closing on it in one week, you’ve received your loan approval and everything seems to be going according to plan. Time to go out and buy new furniture, right? Not exactly. If you are financing your home purchase, here are few tips to help keep your loan on track.
Banks are extremely cautious about home mortgages these days and can withdraw approval if any last minute loan application issues pop up – even up to the day of closing! Here are a few tips to follow when you are under contract on a new home or are thinking about buying a home in the near future.
1) Don’t make any large finance purchases. The pre-approval issued by the lender for your mortgage was based on your financial situation at the time of application. Making a big purchase, like a new car or furniture for the new home, will increase your debt-to-income ratio and will mean more risk for the lender. Even if you were to pay for the furniture in cash, this may prove to be a problem. The lender likes to see a steady balance in your bank accounts. If suddenly, a week before closing, $5,000 is missing from the savings account you planned on using for your down payment, they might get nervous and withdraw loan approval.
2) Don’t apply for new credit cards or allow inquiries into your credit rating. Every time you open a new credit card, your credit score drops. Even an inquiry into your credit rating will lower your score and might affect your mortgage loan status. Don’t be tempted by the “would you like to save 10% off today’s purchase” at the register! Even if your credit is “excellent”, the lender will view the new credit line as a new “loan” source.
3) Don’t make any large deposits into your bank account. As discussed in point number 1, the lender likes to see a steady balance in your bank accounts. They want a clear view of your banking history, balances in your accounts, cash reserves, sources of income and any other potential funds that will contribute to your monthly mortgage payments. A large deposit into your bank account will raise a flag with the lender and they will require legitimate documentation detailing where the money came from.
4) Listen to your lender! As you approach closing, your lender will be asking for quite a bit of documentation. The best thing you can do is to provide that documentation as soon as possible. When you go under contract on a home, there will most certainly be a deadline for loan approval. Make sure you submit everything to your lender quickly to avoid delays that can jeopardize your contract.
Looking for more home buyer tips and advice and live in the Fort Myers area? Our local Realtor Association of Greater Fort Myers and the Beach offers a FREE 8-hour Homebuyer Education Class on the 3rd Saturday of every month. Workbook, handouts, lunch and refreshments are included! Subjects covered include home ownership readiness and affordability, money and credit management, purchase, mortgage and closing processes and more! The class also satisfies the educational requirements necessary for down payment assistance, Florida Housing Finance Corporation and the NSP Program.
Visit http://www.eventbrite.com/event/2569950792/eorg for more information and to register for the next available class.