Now that I have your attention, let’s talk about how things that look like GOOD things can cause a major headache for you in your mortgage process.
I had a client once whose most generous parents decided to surprise him with a very large deposit into his checking account as a “house warming gift.” Aaarrgghh!! Wonderful gesture, but these types of things – as nice as they are – will absolutely throw your lender’s underwriting department into a tailspin and could derail the loan process. Oh, sure, the source can be documented and it can usually be worked out, but mom and dad may not be too pleased at the documentation they may have to provide in order for your loan to go forward. And waiting for the paperwork can absolutely cause a delay in settlement. Please, do not accept any large money gifts until you talk to your loan officer, who can advise how the money should be handled.
Any large deposits are going to be a red flag, so if they cannot be avoided, be forewarned you are going to have to provide documentation as to the source of those funds. So, just be sure you have the paperwork to explain the deposit – and please give your loan officer a heads up before you make any large deposits.
And while we are on the subject of money, it’s best not to move money around, too. Talk to your loan officer first and let them know what you need to do.
I have been known to say to prospective Buyers: Do not spend any money until you settle on your house. Live on Ramen Noodles if you have to.
Now, that is a little dramatic, but my point is you don’t want to run up the balance on any of your credit cards AT ALL because you have no idea what even a small purchase can do to your ratios or your credit score. That seemingly innocent purchase could actually keep you from getting a loan, so it is best to put those credit cards away until after settlement.
No matter how good your credit is, save the furniture shopping until AFTER you settle. Definitely don’t sign up for one of those enticing “take 18 months to pay, same as cash” revolving credit accounts. Just hang tight and enjoy shopping after you get the keys to your new home.
Same goes for new cars. Just wait. You don’t want to take on new debt or lower your bank balance while you are in the process of getting a mortgage. If your old car just DIES and you absolutely have to do something, give your loan professional a call first and discuss with them.
Keep all your financial paperwork handy during the entire loan process. My husband and I were in the process of buying a home one time and although we advised the loan officer we would be out of town and would not have access to paperwork during that time AND although we provided a ream of paperwork before we left, one of our neighbors still had to go to our house, rifle through our financial papers and find our tax returns because the bank had lost the ones we had provided to them initially. The worst case scenario can happen, so be prepared in advance. Keep all of your financial paperwork handy so you can provide it – sometimes multiple times – when the lender asks for it.
Even if you are offered your dream job, with a hefty pay increase, during the loan approval process, be sure to discuss with your loan officer. While a great new job with more money seems like a good thing, any change in job status can affect your loan approval, so again, be sure you keep your loan officer up to date with any changes so they can be prepared for any additional documentation that will be needed.
Just remember, what seems like an innocent, GOOD thing, can cause a real headache – or even a delay of settlement – so be prepared and communicate with your lender about any change, no matter how small.