“Under Contract”, dont jeopardize your loan

By Steve Meyers
August 1st, 2014

I “Close” on the purchase of my new home next week, Thursday. It’s a much larger home than I previously lived in so I purchased some additional furniture for the third bedroom and living room. I put it on my credit card. I’m so excited.

Unfortunately, it’s very likely this Buyer no longer qualifies for the loan they needed to purchase the home. They purchased the furniture using a credit card and the minimum monthly payments on the card went up, thus reducing his available cash flow to pay his monthly mortgage. He just lost his dream home.

OR….I “Close” on the purchase of my new home next Thursday. Because it’s further away from work and my old car was on its’ last leg, I decided to lease a car for 2 years until I could afford to purchase a used car. Unfortunately, the periodic monthly car lease payment will reduce his available cash flow to pay his monthly mortgage. He just lost his dream home.

OR….I “Close” on the purchase of my new home next Thursday. I made an application for my loan back in November and it’s finally closing. At Christmas time I only had 8 people to purchase gifts for so I opened credit cards at Macy’s and JC Penney because of the fantastic deals when using store credit cards. Unfortunately, opening the two new lines of credit lowered his FICO Credit Score. The lender must now increase the interest rate on the loan which impacted his ability to buy his dream home.

What are the do’s and don’ts when looking for a home to purchase and prior to “Closing” on the transaction. When you meet with your lender to get Pre-Approved for a loan, ask him/her to supply you with a list if the important financial do’s and don’ts. There are many things that you might do that will jeopardize your ability to borrow money to purchase a home.

The Do’s and Don’ts of Borrowing
Employment:

a.) Changing jobs
b.) Trying to qualify for a loan with a recent raise
c.) Losing your job or reduction in hours
d.) Not working full time or on the job for less than two years
e.) Having a paycheck that does not have your name, address or year-to-date income on it
f.) Being self employed with declining income
g.) Being self employed less than two years
h.) Declining income

Credit:

a.) Late mortgage payments
b.) Credit lates, collections, or judgements
c.) Recent inquiries into your credit – they need to be explained
d.) Undisclosed litigation including filing for separation or divorce
e.) Address discrepancies
f.) Undisclosed debt that we discover during processing including child support/alimony
g.) Fraud alerts/homeland security

Assets:

a.) Recent deposits over $ 250 – they will need to be explained and documented to the lender
b.) Missing pages of bank statements or brokerage statements
c.) Internet print outs that do not have names or account numbers
d.) Transfers between accounts that are new and unable to trace
e.) Gift funds not documented properly

Rules to follow:

a.) Do not make any changes to your job. If something changes involuntarily advise the lender immediately
b.) Do not apply for any new credit cards or obtain any new debt. Do not let anyone look into your credit without telling your lender ahead of time
c.) Do not make any late payments. Pay all fines, traffic tickets and, return all library books.
d.) Do not spend assets over $ 1000 without discussing it with your lender
e.) Do not go on vacation or out of town without advising your lender
f.) Respond to your lenders requests for documentation within 24 hours
g.) Understand that the underwriter will “find out”. There are no secrets.
h.) Understand that if your lender asks you for something it’s because they need it not because they want it.
i.) Understand that this process is stressful but as a team you’ll get through it together.
j.) Understand that your lender must follow federal regulations and agency rules and guidelines even if they don’t make sense.

I’m looking forward to working with you on your purchase. Send me an email and let’s schedule an appointment to meet and discuss your needs and wants. If you know someone else who would like to read this article, please forward it to them.

Steve Meyers, Managing Broker
Keller Williams Greater Seattle
smeyers@kw.com
(206) 972-3328

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