….assume that you are in the clear and can do whatever you want with your finances. Ask any mortgage lender and they can tell you stories about borrowers who have had their loan closings delayed or even terminated because they thought the lender wouldn’t look at what happens to their finances going forward from the application. Here are some tips that can help keep you from having to say “Oops, I didn’t think it would matter.”
Don’t deposit cash in your accounts. Lenders want to know where your money comes from and cash is difficult to verify. Small deposits may be ok with some lenders but we have seen lenders ask for explanations of deposits under $100. We also had a client almost lose their loan because they sold some guns and deposited the cash proceeds in their bank account. If you receive cash after applying for a loan, talk to your lender before depositing it to your bank.
Don’t change jobs. Lenders like to see employment stability and changing jobs during the time between application and closing a loan will raise a red flag with your lender. Changing jobs may not mean the end of the line for your loan but it will, at the very least, mean more paperwork and possibly a delay in closing.
Don’t take on new debt. Whether it’s a new car or furniture for the house you are buying, wait until the loan closes before adding a new payment to your monthly expenses. New debt means higher debt-to-income ratios and will require that the lender re-qualify you as a borrower. That can lead to disqualification.
Don’t even APPLY for new credit. You may just be planning ahead and opening a credit account at your local home improvement store so that when your home purchase closes you are ready to roll. The problem is, applying for credit affects your credit score in a negative way. Even a small drop in your score can change the interest rate on your loan or worse, make you no longer eligible.
Don’t co-sign a loan with anyone. Lenders don’t care how much you protest that you will never have to make a payment on that loan you co-signed with your brother. As far as they are concerned you are obligated to make the payment and that payment will count against your debt-to-income ratio.
The best advice is to be aware that just because you have given your lender all your tax returns, pay stubs and bank statements doesn’t mean that is all they will look at. Loan underwriting is an on-going process and the lender can and will continue to evaluate your credit worthiness all the way up to closing. Throughout the loan application and underwriting process be sure to discuss anything regarding your finances with your lender BEFORE taking action.