It’s not over until it’s over. In the world of mortgages, this saying couldn’t be more true. Because while getting pre-approved, finding a home, and getting your offer accepted puts you close to the finish line, it doesn’t get you across. You still have to close.
If you’re not careful, a financial misstep could change your mortgage terms and/or interest rate. Or, it could get your loan denied completely.
To make sure that doesn’t happen, avoid these key money mistakes.
- Accepting a Large Monetary Gift
Large influxes in cash can be red flags for the loan processor because they won’t automatically know if the deposit is a gift or a loan.
What is the issue? If the deposit is a loan, it will count against your debt-to-income (DTI) ratio. In order to prove the deposit was indeed a gift, you’ll often need to provide a letter of explanation signed by both you and the giver. The time required to acquire and submit this could delay your loan’s closing date.
- Making a New Investment
You’ve saved a large chunk of change in preparation to buy. That’s great. Keep that money right where it is.
With all that cash on hand, it can be tempting to invest. After all, who doesn’t want to make a little money with their money? Avoid the temptation. Do not – under any circumstance – move that money. It can derail your loan’s approval.
- Open a New Credit Card
When you open a new credit card, you effectively adjust your DTI ratio. Your DTI plays a major role in determining whether or not you’re approved for a loan and what interest rate you can secure.
- Buying a Car (Especially on Credit)
Buying a car on credit is the same as taking out another loan. This negatively impacts your DTI ratio. It also typically triggers a credit inquiry.
Credit inquiries prior to closing will be flagged by the loan processor and could keep your mortgage from closing.
- Accepting a New Job
Until you close, the rule of thumb is to avoid any major life changes. This includes accepting a new job offer, even if it comes with a bigger salary.
Employment history indicates you’re a trustworthy borrower capable of making regular monthly payments. When you change jobs, you effectively start over from zero. This won’t always effect your loan’s closing date, but it could.
- Taking a Leave of Absence
You’re up for your 10-year sabbatical. That’s awesome. But maybe stick it out until you’ve closed.
Like accepting a new job, taking a leave of absence is a major life move. It could send up a red flag and delay your loan’s closing date or even cause your loan to be denied.
- Going on a Major Shopping Spree
Are you excited about outfitting your home with a comfy couch, new bed, and gorgeous dining room table? We feel you. But wait to buy those pricy items until after you close. Major purchases, especially ones you’re likely to put on your credit card, can negatively affect your DTI.
Have a question about the approval process? Talk to me today, I look forward to helping you get your dream home.
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