10 Obstacles to Avoid when Closing on Your Home Loan.
Even the easiest home loan takes some time to close. These tips provide insight to avoid the pitfalls between application and closing so that you can help make your loan process as quick and easy as possible!
- Buying Large Items
Avoid buying cars, or other expensive items. Such purchases can change your debt-to-income ratio or the number of reserves and may disrupt your home loan eligibility or delay closing your loan. It is best to wait, review your budget after closing and make any major purchases that you can do comfortably at that time.
- Job Change
Quitting a job or changing a job can affect your home loan eligibility. If you are planning to move to a new position or company, try and hold off until after closing if possible. Most employers will understand the need to wait for you.
- Credit Change
Avoid opening or closing credit lines. Opening new cards lead to stricter inquiries on your credit report, and closing credit lines can increase your credit usage. Any of these can lower your credit score and potentially change your interest rate or home loan eligibility.
Avoid changing bank accounts. Underwriters often require bank statements and records to approve your loan. Changing banks can mean the need to provide all-new details, and delays in closing.
- Ignore Questions
Answer all the questions of your loan officer. Your loan officer is collecting information and documents from you that are important to close your home loan. Ignoring the requests of your loan officer or loan processor can delay the closing.
Do not pay bills late. Even a late payment can have a major impact on your credit score, and it takes time to resume your score after it has been paid. This change in your credit score can negatively impact your rates or acceptance of a home loan, so it is very important to be extra cautious and avoid any late payments before closing.
- Credit Checks
Do not let anyone other than your loan officer conduct a credit check on you. Many credit inquiries place stringent inquiries on your credit report, which can lower your overall credit score. This can change your rates and eligibility for a home loan, so it is best to avoid any credit check until your home loan is closed.
Do not sign or co-sign the loan. Forcing yourself to a different loan before closing affects your debt-to-income ratio. Even cosigning for someone else means that you are still liable to pay for this other debt. The best-case scenario is that your loan officer will require additional documentation for you regarding this new loan, which may delay the closing. The worst-case scenario is that this new loan will negatively affect your debt-income ratio to the point where you are no longer eligible for your home loan!
- Avoid Large Deposits (Other than your paycheck)
Mortgage companies are required by federal law to look for large deposits, so any unusual large bank deposits often require a written explanation and this can delay the closing of your home loan.
Do not take an advance on your salary. This can change your payment schedule which can lead to hindrance in acceptance of your home loan.
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