"Yes! We were finally approved for our loan and we are on our way to realizing the American Dream of homeownership. Let's celebrate by going to Las Vegas before we close on our loan. Remember: 'What happens in Vegas, stays in Vegas.'"
Whoa! Let's slow down, here. If you want to make sure that your home loan is "in the bag," then don't be so quick to pack that bag for the trip to Vegas.
I remember a couple that had been approved for a loan and were waiting for it to fund; however, a pre-funding employment verification revealed that the wife had just quit her job. Unfortunately, they needed both incomes to fund the loan and, consequently, their loan was put on hold until she found another job.
None of us want to end up in a situation like that; therefore, let's review 5 things to avoid while you are waiting for you loan to close:
1. Taking on financial obligations that will increase your monthly payments. Buying that new car, even if it is that hybrid you've been researching all this time, may increase your debt-to-income ratio just enough to disqualify you from your loan. This holds true for any type of monthly financial obligation that will increase your total monthly debt payments such as charging up a storm at ritzy hotels in Las Vegas.
2. Opening new credit lines. Yes, that 0% for 12 months offer may sound very enticing, but this may change your risk profile or decrease you credit score just enough to put a wrench in your approval.
3. Paying more than 30 days late to your creditors. You might think that since your credit report has been pulled already, your credit history won't matter too much until the next time you apply for a home loan. However, sometimes your credit report might be pulled again for crazy reasons such as your file being corrupted in the computer system and the only way to restore your credit report is by re-pulling your credit. Unfortunately, if that late payment shows up on the new report, then your score or profile may be sufficiently affected to cause your loan to be denied.
4. Making large withdrawals or deposits to your bank account. If unusual amounts of withdrawals or deposits are found in your bank account, then underwriting may want an explanation of that activity which could affect the loan decision.
5. Quitting your job or suddenly turning into an entrepreneur. Banks want to give mortgage loans to people who have a good prospect of continuous employment and income. If you quit your job or are laid off, then this will cause underwriting to reconsider their decision since it may be uncertain whether your income will continue. Further, if you suddenly decide to tell your employer to "take this job and,...!" and then you go and open up that espresso shop you always dreamed about, then this would put you in a different category. Being self-employed carries different type of risks and lenders generally like to see you running that business for around 2 years to feel good about your future income stream.
Therefore, before you take any of these actions or any that will change your original circumstances, speak with your Mortgage Consultant first to make sure that your loan approval will not be in jeopardy.
Has anyone seen any other actions on the part of a borrower that caused a loan to be denied or the approval to be postponed?