Home buying 101: making sure you get to closing
One reason why home buying can get derailed is that the lender denies the mortgage after giving the initial approval. Specific factors can cause the initial evaluation to pass, but not the second, and today we’ll explain how you can avoid having that happen to you.
If you’re in the process of buying a home when you land your dream job, keep in mind that changing jobs is very likely to cost you the mortgage. The reason is that when you change jobs you undergo a probation period and you might end up not hired; that’s huge risk when it comes to evaluating you for a long-term debt.
Before applying for a loan, you should have made a budget that included how much you will need/expect to spend on furniture, appliances, and lighting. The reason you need to know this ahead of time is that once their loan is preapproved, there are peeps who decide to hit the furniture stores to take advantage of those ‘buy now, pay nothing for 12 months’ offers; others plan to use a 0-balance credit card they were holding just for this purpose.
Please, wait until after closing to make those purchases. Your preapproval evaluation used the debt ratio analysis; if you acquire new debts during the mortgage process -when a more detailed examination takes place-, that ratio will change and it won’t be in your favor. Patience!
Late and non-payments
This is extremely important: Remember to pay all your obligations on time! At the end of each month, all businesses that report to credit bureaus send out their data for that month’s activity on your accounts. If you forgot to pay one or several bills, this will appear on your credit report and it will affect your credit right away.
Large funds transfers
It’s perfectly acceptable to use qualified withdrawals from some investments and accounts to pay for your down payment and/or closing costs; some family member cash gifts are also fine. But whenever you move money to/from your accounts in large numbers, you must be able to justify those movements to the lender, or you run the risk of losing the loan.
If you’re making these transfers after being preapproved, keeping records of every movement, where and how each originated goes a long way to helping you; it would be even better if you were able to inform your loan officer before you make those transfers.
The appraisal is the process of ascertaining the home’s value so that it matches -or is above- what the buyer is asking for it. This is beyond your control, but keep in mind that the appraiser might find the buyer’s price too high, or he/she finds a condition that may thwart the type of loan you were approved to get; this is especially possible when asking for state help from agencies like the FHA, or when there are large construction projects pending either in the home, the home’s complex.
This doesn’t mean you won’t get a loan, but it might change the type of loan you can get, or you might get special loan clauses.
In general, it’s rather likely that your loan process will go smoothly from beginning to closing. Our last bit of advice is: keep open the lines of communication with your loan officer and real estate agent. If you have questions, try to not swamp your loan officer with individual ones but instead, jot down various questions and contact him/her when you have several. Also, if they ask you urgently for a document or piece of information, try to provide the answer as soon as possible; if there will be a delay in providing it, explain the reason why.
And that’s it. We can’t promise you that if you follow all these tips that you will get your mortgage, but there’s no question that if you do, you are far likelier to get into your new home, via a quieter process with few or no bumps.