The holiday season is upon us and the temptations that come out this time of year make the home buying and mortgage process even more hectic and tricky than normal. A common misconception homebuyers have is their mortgage approval is complete when the loan officer gives them a pre-approval letter. What most consumers do not realize is the mortgage approval process occurs in stages and continues until your closing day.
Any changes made to income, assets added, or debts accrued can change an approval to a decline in an instant. It’s best for homebuyers to consider themselves as “posing for a financial photo” during the time between their loan application and their loan closing. By keeping their financial situation still and unchanged, the lender will get the best picture and the closing should happen without delay.
Buying a home comes with its own pressures and when you add the stress of the holidays on top of that, it can be a recipe for disaster. Here’s what you can do after applying for a loan to avoid making the same missteps other borrowers made that led to closing delays or loan declines:
· Avoid paying off collections.
It’s always best to consult with your licensed loan officer before attempting to pay off a debt, especially once you have a pending home loan. Paying off an old account could make you credit score drop for a time.
· Keep your funds where they are.
Don’t move funds around between accounts and don’t open new accounts. All mortgage loan program underwriting guidelines require a minimum of the last two months of complete bank statements. Any movement of your money can cause delays if it isn’t completely documented.
· Don’t make any unscheduled deposits into your accounts.
Anything outside of a normal payroll deposits must be fully documented as to the source of the funds. If you receive money as a gift during the holidays, consult with your loan officer before depositing that money into your account.
· Large purchases should be delayed until after closing.
Items such as furniture or a car can put a loan in danger. If you have to open a line of credit or increase your debt for the purchase, your closing could be delayed, or worse, you may no longer qualify due to the additional debt. Do not be tempted by holiday sales or promotions – you can take advantage of the next sale once your home closes.
· Do not open new lines of credit.
Even if you don’t make a purchase on the credit, the inquiry itself could result in a delay or a decline for your loan. New credit lines effect your credit score and should be delayed until after the closing.
· Do not quit or change you job.
If an amazing opportunity comes along, discuss how the potential change will impact your approval with your loan officer. Even a start date after your closing can affect the loan process when the lender contacts your employer to confirm employment. A notice date from your current employer could but the breaks on your loan approval.
· Send in all requested documentation without delay.
If the loan processor needs anything after the initial loan application is completed, it should be sent immediately. The sooner you send any additional documents, the sooner the loan can be finalized and cleared for closing. Don’t assume that you can bring your documentation to closing because most items will be necessary prior to approve the loan.
· Keep documents unpacked.
Once you are pre-approved and have put in an offer on a home, you will want to ensure your tax returns, W-2s, bank statements, pay stubs, and retirement account statements are set aside. Feel free to pack your clothing and personal items but keep your financial documents easily at hand until closing.
The process of purchasing a home and getting approved for a loan can make a lot of people nervous, especially if they are doing it for the first time. But if you avoid making the common borrower missteps above, your approval process will go smoothly and you can get the keys to your new home on time!