Avoiding Problems From Application to Closing

Today’s lending environment is extremely cautious. When you applied for your mortgage you provided an extensive list of documents and as you proceed through the process you will be asked for more documentation.

I want to remind you that the underwriting of your file will continue right up to the time you are closing. This means that you need to be careful and not do something that will negatively impact your ability to close.

Below is a list of mistakes I’ve seen applicants make during this period that resulted in a delayed closing, an increase in the cost for financing or the application being denied. Since some of these things aren’t obvious, I felt it would useful to bring them to your attention:

• Changing jobs before closing will not trigger a decline, assuming there isn’t a sizable drop in income. It can however cause a delay in the closing date since you will need to provide pay stubs from your new employer. If you have an opportunity to accept a new position, by all means take it. Just realize that it may cause your closing to be postponed for a few weeks.

• Avoid applying for or taking on any additional debt. You have to assume that a new credit report will be run just prior to closing. New inquiries and additional debts will have an impact on your credit score.

• Another result of increasing your debt burden is that it will increase your debt-to-income ratio. It is possible that the additional monthly payment will bring your ratio high enough that it will cause you to no longer qualify.

• Any large deposits or withdrawals in your accounts need to be explained and documented. If you do transfer money among your accounts before you close please keep all the records of the transfers. If it becomes necessary to update your bank accounts you will already have any supporting documentation readily available. This will make the process go faster.

• The same thing applies to your pay stubs. If you normally don’t keep them please start. In the event you need to update your income documentation you will have them easily accessible.

• Billing disputes happen. In the event you end up with a dispute with a doctor, gardener, etc don’t let it escalate to a collection account being filed or worse, a judgment. This will have a serious impact on your credit score. I’m not suggesting you give in and pay. I am suggesting you keep the lines of communication open to prevent the problem from getting in the way of your closing. Take the stronger position after you close.

• You want to furnish your home as quickly as possible but you know better than to finance the purchases at this time so you’re thinking about paying cash. Just be careful not to deplete your cash assets too much. Remember the amount of money you have after you close is an important factor in underwriting.

• Don’t decide to cosign on a loan. Although you know you’re not paying the monthly payment, the credit report will show you’re liable and the bank will add the entire monthly payment when calculating your total debt.

In order to protect the overall integrity of the mortgage industry lenders are obligated to feel 100% certain that any loan they grant will perform. This focus on excellence requires you the applicant to supply more documentation than ever and more time will be spent in approving you application.

Be patience and cooperate, the process is not easy for anyone involved. This level of diligence will help keep mortgage rate low resulting in a stronger housing market. This benefits us all.