To insure mortgage approval and closing, the most important step you can take as a New Jersey mortgage loan applicant is to NOT make any changes to your job or financial picture until your mortgage loan has closed and the keys to the home are in your possession. I have written about this before, but it is always worthy of a repeat.
This is particularly true for credit and credit scores. At a time when a 10 point drop in a score can raise the interest rate by 1/4 point or more, sometimes it could cause a flip in the approval. Most borrowers are not knowledgeable enough about the credit scoring system to understand how seemingly meaningless actions could cause a big drop in score.
If you have applied for or intend to apply for a mortgage, steer clear of the following:
- Do not take on new debt. Do not open new credit accounts and do not charge any major purchases. Your credit report may be pulled again immediately prior to closing.
- Do not change jobs. If at all possible, try not to make a career move during the time between your mortgage application and your settlement date. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and maybe a delay in closing.
- Do not lease a new car. This should go under the general heading of “no new debt”. It is highlighted here because, for some strange reason, many people do run right out and lease a new car during the intervening time between mortgage application and closing! As with any debt, this will change your “back-end ratios”, and may cause you not to qualify for your mortgage.
- Do not move funds around in your accounts. Avoid making large, unsubstantiated withdrawals and deposits. In the event this does happen, be prepared to verify the source of the funds. If funds were earmarked for the closing, leave those funds in place.
- If you were given a gift of funds to assist in a purchase transaction, do not withdraw the funds or use the funds for other purposes.
- Do not bounce checks in your account. To the underwriter, this shows a lack of ability to handle your finances at a time when you are making a major purchase.
- Do not pay creditors late.
- Do NOT pay off collection accounts or charge-offs.
- If you are refinancing, continue to make on-time payments to your current mortgage company until the refinance is completed.
- Likewise, if you are doing a debt-consolidation refinance, continue to make on-time payments to your creditors until the refinance is completed.
Basically, keep everything about your credit, work, and financial life the same as it was before you applied and received pre-approval for your loan. In that case, you should be in solid shape to close your loan. If you find the need to make changes, inform your New Jersey mortgage consultant before taking any action.
Until my next post . . .
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