As the spring housing market takes off, the most important thing buyers can do is make sure they do not make any mistakes that can affect their loan approval. Remember a loan approval is not the same as a loan! Once your lender gives you your approval letter and you make an offer on a home, there are many steps that are left to do. With the housing market going a bit crazy, it really helps to make sure you do not make a mistake that could change your approval into a denial!
Here are some common mistakes that homebuyers make that you want to avoid:
-Do not quit your job when you are buying a home. It may make sense but there are times that people think that getting a new position with another company is not a big deal. If you are moving up the ladder and making more money in the same field, it may not be a big deal. However, if you are self employed or get commission income, it may change your approval to a denial. If you go from a stable job to something that an underwriter feels is not stable, it could deny your file. Income has to be stable, verifiable and enough to pay your bills.
-Don't buy big ticket items on credit. I have had clients buy cars – that may work if you talk to your loan officer and make sure you can qualify with the new payment, we also need to document the new loan and the terms of it. Any credit inquiries will have to be explained and any new debt will need to be documented. Depending on how close to the limits you are, it may change that approval into a denial.
-Don't change the source of your downpayment – if you had an approval with money in your savings account and spend it, you may have an issue. If you change your down payment to a gift, we need to run it through an underwriting system – a gift may change that approval to a denial. If you decide to sell property (cars, other personal property), it may work, but you need to document the transaction and most important, we need to be able to determine the value of the property. Cars are easier but selling a musical instrument or some other items may be very difficult to document. If you have a lot of cash deposits into your bank account, it can make a difference. We need to be able to document cash deposits and sometimes we need to back them out of your account- that can easily make a huge difference in your approval.
-Don't miss payments – do not forget to pay a bill. We will do an update to your credit report right before closing. We are looking for new debt, but also looking to make sure all payments are still on time. A forgotten credit card or car payment could easily turn that approval into a denial.
-Do not disappear when you are buying a home! It may sound funny but there are frequently times that your lender may need a question answered or a form signed. Maybe another bank statement or paystub. If we can't reach you, we can't get your loan finished. I'm amazed at the number of times I can't reach a buyer – it may take a day or three to get a quick answer. With the federal law changes in October, it's necessary to get a closing disclosure signed three days prior to closing – if that doesn't happen, it will delay your closing.
Most important is to follow up with your loan officer if you have any questions on anything! Make sure you understand what is going on, ask questions and if your loan officer asks you for documentation, get it to them as soon as you can! Everyone is getting very busy this spring and we want to get your file approved as soon as we can!