I have to write about this because, as bad as some of this can be, people will try to do it without a completely understanding of how things work. It is especially heart breaking, just before closing, to be denied your mortgage loan after receiving the conditional approval.
Let us start with the most common mistake that kills a mortgage loan.
Many times, a borrower has a very kind and generous family member who is excited to help them get in to a home. This kind hearted person reaches in to the old cigar tin under the mattress and pulls out a couple thousand dollars of cash to give to their favorite loved one
The borrower, all excited about now having the cash to put in the new kitchen or bathroom, puts the money in their account a few days before the closing. As with all loans, the lender will ask for updated assets, or as such bank statements to ensure the borrower has the cash to close. The underwriter will see this large deposit and ask for it to be sourced. Meaning, we have to prove where the money came from. We have to prove this to meet government requirements of insuring that the lender is not funding terrorism or laundering money. All deposits must have a paper trail of their source of origination. A note from Uncle Ernie will not do.
The second most common mistake is purchasing furniture for the new home on credit. Going shopping for furniture, before closing on your home, may sound like a great idea–but it is not. It can be so exciting to walk into the show room and see that beautiful living room set with the big flat screen TV. Just then, the happy salesman comes over and tells you if you grab that set now he can give a 20% off; and if you put it on credit with zero percent interest for a year and you will also get an addition 10% off–how could you go wrong, Right? Well the living room set and TV cost $5,500. And 48 to 72 hours before closing the lender re-pulls credit reports on all borrowers. The lender now sees the new credit purchase adding 10% to the borrowers DTI (Debt To Income ratio) putting them over the allowable limit. The lender now denies the loan and the buyer has great new furniture but no house.
Mistake number three, taking a few days off before the closing to get ready to move. The lender will ask for your last pay-stub too and if your income dropped because you took three days off without pay. You will be denied.
Be smart, once a mortgage loan is applied for do not make changes to your financial profile it could be very costly. Ask us at Solutions First Mortgages Inc. about the do’s and don’ts while in the process of a mortgage loan.
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