Your mortgage is approved, you think you are all set for closing. Nothing to worry about, right? Wrong!! This is happening more and more often in the last couple of years. There are several things that lenders have to do now prior to closing that we didn't do in the past and it can affect your mortgage approval.
The following is a list of things to remember when you are applying for a mortgage:
- Do not change jobs or become self-employed (or switch to commission/bonus income).
- Do not buy a car, truck, etc!
- Make sure you make all your credit card, student loan, etc monthly payments.
- Do not max out your credit cards.
- Do not open any new accounts or allow anyone to pull your credit report.
- Do not buy furniture for your new home until after you have closed.
- Do not make any large deposits into your checking/savings account!
- Do not change bank accounts.
- Do not co-sign for anyone else.
- Do not spend the money you have saved for your down payment.
Some of these sounds a little crazy, but believe me, they all happen!! We have to verify all the money that is used for closing and if there are large deposits into your bank account, we need to know where that money came from. If it comes from unsecured debt (lines of credit, cash reserve accounts, credit cards), it can not be used for closing. If it is gift money, we need to document where the money came from and get gift letters along with additional documentation.
New credit accounts (cars, credit cards) can affect your ability to qualify and may change that approval to a denial! Any inquiries will have to be explained and if there is new debt, we need to document it.
Job changes or income changes can affect how much income we can use and may also change your approval - or postpone your closing. Typically we need paystubs showing 30 days of earnings and if you switch jobs, you may have to wait until you have a paystub with a 30 day history.
Some of these may make sense, some may seem a little crazy, but it can affect your approval. I remember a story from a realtor I work with - his seller closed on the sale of his home and decided to take the proceeds (which he needed for the new home he was buying) to the casino....he thought he could make some extra money and instead he lost some of it and couldn't buy the new home! Then he had to explain all of this to everyone else involved! That is the extreme! However, even a large deposit into your bank account that comes from a line of credit can affect your approval. If we can't use that money, you may be short cash to close.
