So you’ve looked at dozens of homes…made several offers…and finally, FINALLY you have a ratified contract. Congratulations! But before you get to the settlement table and finalize the purchase, there are some pitfalls to avoid so that you don’t destroy all of that hard work.
Here’s a short list of “Don’ts” to keep in mind so that you settle on your new home with no problems:
1) Do not a co-sign ANYTHING for ANYONE.
I know that you’ve always been there for your favorite niece, but she will have to wait this time. That new loan will change your debt to income ratios and now your $525,000 approval just became $450,000...and that dream home you have under contract just went bye-bye.
2) Don’t open ANY new credit lines
That includes the furniture store because you want to get a jump on furnishing your new home. Don’t get a new Visa card or American Express, or ANY new forms of credit…even if you don’t intend on using them until after you close.
3) Don’t close your bank accounts or change banks.
Lenders are very sensitive about changes to your original loan application. In this new world of global frauds and scams, you don’t want to give them any reason to delay, postpone or cancel settlement just to make you prove that you aren’t an Al-Qaeda operative.
4) Avoid major purchases
Don’t make any major credit purchases 30-60 days before closing. Hold off on purchasing furniture, appliances, or cars until AFTER settlement. Why you ask…great question! See number one about debt to income ratios.
5) Do not omit debts or liabilities on your mortgage application.
FULL DISCLOSURE is the name of the game in buying a home. Identifying any issues with financing early is the best way to plan to overcome those obstacles. Lenders will see your entire financial picture between your bank statements, paystubs and credit report. Being dishonest about the true picture of your finances will eventually catch up with you. You might be surprised at the number of programs there are to help you overcome the very obstacle that you may be.
6) Avoid big deposits just before settlement.
And if you must, make sure you keep a VERY THOROUGH paper trail showing that the funds are from a legitimate source. Not only do lenders want to make sure you aren’t an Al-Qaeda operative (see #3), but they also aren’t very fond of thieves, drug dealers, money launderers and the like. If you aren’t able to prove that your funds are from a legitimate source, then the lender won’t let you use them.
7) Don’t dip into the funds you’ve set aside for closing.
This one should be pretty self-explanatory, but it’s always better said than not. Trust me when I tell you that NO ONE is going to ‘round down’ to the nearest thousand at the settlement table. As the saying goes, “Nickel on the barrelhead or no go.”
8) Don’t miss any payments on current lines of credit.
Missing payments is usually a sign of financial difficulties and/or financial irresponsibility…neither is a good sign for a lender deciding whether to give you several hundred thousand dollars.
9) Lastly, UNDER NO CIRCUMSTANCES should you quit, change or get fired from your job!
Smile and deal with the overbearing boss and the annoying co-worker…you’ve done it this long, a few more days won’t hurt. And though self-employment may ultimately be your future, don’t make that decision until after you settle.
Ultimately, lenders want to see two things: An Ability to pay the new mortgage and a Willingness to pay it. The ability to pay is determined by your income. Your willingness to pay is shown in your credit score. If you follow these nine suggestions, you’ll keep both of them in check. This will Allow for a smooth mortgage financing process.
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