8 Pitfalls to Avoid for a Smooth Closing
Now that you've completed your loan application, you want to avoid unnecessary changes to your financial situation. Here are some things you do NOT want to do so that you have a smooth closing.
Do not apply for new credit or consolidate debt
When we qualify you for a mortgage, we take into account all your outstanding debt. If that amount changes, you may no longer qualify. And please remember that a lease is the same as a loan when qualifying for a mortgage.
Shortly before we close, we may order a new credit report to make sure you don't have any debts that didn't appear on the application. If the report shows new inquiries that are not from our company, you will be asked to explain them before we can close.
If you have to take on new debt (e.g., your car dies and you have to replace it), please make sure you alert us before you do so we can discuss the ramifications. We will need to recalculate your qualifying ratios based on the new debt. We'll also need a copy of the loan documents.
Do not co-sign for anyone else's debt
Co-signing for a debt is the same as having your own new debt when applying for a mortgage.
Do not quit your job
This one seems pretty obvious, but it happens. Shortly before closing, we have to check that you still are employed.
Do not make unnecessary large deposits
We have to explain any large deposits that appear on your bank statements for the last 60 to 90 days. Deposits that are employment-related or associated with retirement income are usually obvious. However, the $5000 check for your old boat won't be so obvious. Please talk to us before making any atypical deposit greater than a few hundred dollars. If you need the funds for closing, we'll help you document it.
Do not move money between accounts unnecessarily
We have to document the movement of money between accounts. Given that account statements often have different reporting dates, you may have to visit your banks for updated statements if you move money around.
Do not make late payments on existing debt
Late payments also will show up if we order another credit report before closing. Late payments can torpedo your mortgage application, especially late mortgage payments.
Do not spend your closing funds
We can give you a good idea how much money you'll need to close your loan. Make sure you keep that amount in your accounts. Do not spend that money assuming you can replenish it before closing. If we have to get an updated bank statement, and it no longer shows sufficient funds, we won't be able to close.
Do not take cash advances on your credit cards
You cannot borrow the money for your down payment or closing costs. This restriction includes cash advances on your credit cards. If you do, we may have to recalculate your qualifying ratios considering the borrowed funds.