Congratulations on reaching the pre-approval stage, successfully finding your dream home, and having your offer accepted! It is a monumental achievement, yet the journey to homeownership isn't quite over, as Lenny Kravitz aptly reminded us with his lyrics, "It ain't over till it's over."
While the odds of encountering major setbacks are relatively low, it is essential to remain vigilant and cautious. A financial blunder at this crucial juncture could alter your mortgage terms, interest rate, or even lead to outright denial—regardless of a scheduled closing date. To ensure you navigate these final stages seamlessly, steer clear of these misguided money moves.
1. Caution with Moving Funds
Resist the urge to shift money around, particularly if you are contemplating moving cash reserves into stocks while awaiting closing. The intention might be to earn extra profit, but this shift can disrupt your loan approval process.
Casey Fleming, a mortgage adviser, emphasizes the importance of maintaining cash liquidity for the underwriter's assessment. Fluctuations in stock prices can lead to deductions in asset value. Instead of a seamless $100,000 in savings, a stock adjustment could present just $70,000. You need sufficient funds to cover the down payment, closing costs, and at least three months' worth of mortgage payments. A sudden dip in assets might trigger a denial.
2. Steer Clear of Work Leaves
Lenders rely on your consistent employment to ensure your ability to fulfill mortgage payments. While unforeseen circumstances can lead to leaves of absence, exercise caution unless necessary. A voluntary leave can jeopardize your mortgage approval timeline or even result in denial. Fleming recalls an incident where medical leave two weeks before closing led to a delay.
3. Controlled Approach to New Credit
New credit applications and inquiries should be approached with care. While a limited number of inquiries typically will not significantly impact your mortgage, accumulating numerous inquiries before closing can have negative repercussions. Lenders may perceive this as risky behavior, reflecting potential debt accumulation.
Avoid seeking excessive new credit or credit limit increases during this critical period. Prioritize stability to safeguard your mortgage prospects.
4. Prudent Spending Habits
The excitement of homeownership can trigger shopping sprees for new furniture, appliances, and more. While it's natural to indulge, exercise restraint, as excessive spending can disrupt your financial stability. Large credit purchases shortly before closing can alter your debt ratios, interest rates, and even cause lenders to reconsider your risk profile. While modest charges on credit cards may not pose an issue, defer significant purchases until you have successfully secured the property.
5. Thoughtful Job Changes
Changing jobs, especially during the home-buying process, can introduce complications to the paperwork and lender assessment. While some transitions are manageable, others are riskier. A switch within the same industry with similar functions might be acceptable, but major industry shifts could be perceived as unstable.
Transitioning into roles dependent on bonuses or commissions—even if they promise a higher annual income—can raise concerns. Lenders evaluate your ability to repay the loan, factoring in future earnings. Any changes should be discussed with your lender or broker to ensure a seamless transition.
Purchasing a home should always bring excitement, but it should also be tempered by caution and wisdom. By mastering the details and putting your faith in experts to provide you with the right advice, you can ensure that your path to homeownership goes as smoothly as possible. Knowledge is power; research thoroughly, understand all the key steps you need to take along the way, and avoid costly financial missteps.
When you are ready to explore loan options for your purchase, don’t hesitate to reach out to your mortgage lender or get in touch with Scott and the Smolen team today. They will help guide you through every step of the process so that you can make informed decisions and enjoy stress-free house hunting — so that when you finally sign on that dotted line, it'll be with exultant joy!
