Closing your mortgage is a complicated process as it is, so adding roadblocks will only stall or even stop your home loan from closing. Take a look at these ten common roadblocks when closing your mortgage, and how to avoid them.
10 Roadblocks that Can Hold Up Closing Your Mortgage
Don’t Buy a Big Ticket Item
Buying a home is really exciting! A new home means refreshing some of your electronics, furniture, appliances, and art. Just make sure you save these big purchases until after you close. Paying a bunch in cash a month before you close will likely flag your lender and will delay the process.
Don’t Quit or Change Jobs
Changing jobs can reflect instability in a lender’s eyes. It’s good to have been at a job for two years when applying for a loan. Try to wait to change jobs until after you have signed your closing papers, so you don’t risk delaying or terminating your loan. If you are in a dire situation, talk with your lender and see if it’s ok with the proper documentation.
Don’t Pay Your Bills Late
A big part of determining your home loan allowance is based on your credit score. And your credit score is partly determined by how well you pay your bills on time. Late payments can lower your credit score, and lenders not only monitor your score when you first apply, but may pull your score before closing. Setting up payments on auto-pay can help reduce the stress of paying on time.
Don’t Open/Close Any New Lines of Credit
Both of these can negatively affect your credit score. If you are in desperate need of new appliances, try to wait until after you’ve purchased your home. If it can’t wait, talk with your mortgage lender about if you are in the clear to open new lines of credit.
Don’t Let Anyone Else Pull Your Credit
Credit inquiries lower your credit score and this could lead to major road blocks. After you’ve found the mortgage lender that you wish to work with, hold off on any other credit pulls until after you’ve closed. This could be pulls from other lenders, car dealerships, retail cards, etc.
Don’t Make Any Large Deposits In Your Bank (Other Than Paychecks)
If you happen to receive a large sum of money while you are closing, be expecting to explain and source the deposit with a letter. To a lender this looks suspicious as it’s not part of your stable income and you may not be able to pay your mortgage on time in the future. If the deposits were a gift, you’ll need to provide a letter from the donor as well as the donor’s bank statement that shows the funds left their account.
Don’t Co-Sign With anyone
If you choose to co-sign with someone, you are legally responsible for that debt, and it will increase your debt to income ratio.
Don’t Change Bank Accounts
Providing bank statements is a large part of the documentation needed from a buyer to a lender, so imagine having to provide double the documentation if you switched banks in the process. If you are compelled to change, you’ll have to provide bank statements from each bank and source all funds. Try to wait until after closing to change your bank.
Don’t Take Out Any Payday Advance Loans
To a lender, this reflects a lack of money management. This is not what you want to convey when applying for a home loan. This will also change the status on your bank statements which definitely delays and could possible terminate your loan.
Infographic: 10 Roadblocks when Closing Your Mortgage
The Fornerette Team at Guild Mortgage Tacoma Branch is committed to providing clients with the highest level of service. Our mission and passion is to work with home buyers to fulfill the dream of home ownership. We build lasting relationships that create value and stand the test of time.