You just found your perfect home and have a contract on it! How excited you are to move to the next chapter of your life! However, the time period before you actually own the home can be the most work and stress you will have to do just to get to the finish line. You must also have some restraint on the fun things you would like to do for your new home! It is important to be prepared for what’s ahead.
First, your lender is going to ask you to provide them with a lot of documentation: Paycheck stubs, W-2s, tax returns, bank statements, etc. They stop just short of asking for your firstborn child! Be prepared for your lender to ask for further documentation within a week of closing. Even the smoothest loan process can be a little frustrating, so it’s good to be prepared.
Here are a few things you need to make sure you DON’T do!
DON’T make any large purchases! This can include buying a new car, and more commonly, furniture and/or appliances for your new home. I know you are excited to move in and decorate with all new things, but it is important to wait until after you close. Any change in cash or credit can affect your loan as it is a change in your income to debt ratio. It may not hurt your actual approval, but the lender has to start over in reviewing everything and this could cause a delay in closing.
DON’T open any line of credit! This is similar to the statement above. You may get a 0% balance transfer credit card offer in the mail and you think how helpful this will be in getting the items you want/need for your new home. The credit card company will pull your credit and this can potentially lower your credit score. A lower credit score may cause a higher interest rate from your lender as well as higher mortgage insurance premium.
DON’T put any large deposits in your account! Although some types of loans allow “gifting”, there are new rules for gifts, that include the lender needing to have copies of bank statements from the person gifting you the money. If a family member or friend wants to help you buy new furniture, etc. for your home ask them to give you the money after closing, or it needs to be in your account, deposit it at least 60 days prior to your contract date. Once you hit the 60 day mark, the money is considered “seasoned”.
DON’T move money around between accounts! Every time you move any money, the lender must source it. It becomes tedious and more work on both you and the lender. Make sure you have all your money where you want it before you even start your home search. This will make for less headaches later.
DON’T change jobs or leave your current position! When you apply for your loan, the lender needs a minimum of 2 paycheck stubs that total at least 30 days of pay (some lenders require more). If you decide to change jobs in the middle of your loan process, this could delay closing on your home. Always keep in mind that the seller may choose not to wait.
It is important to make sure you communicate any changes to your lender throughout the process. The sooner the lender knows what is going on, the quicker a solution can be found. Just remember there is a light at the end of the tunnel and within the next 30-45 days you will be enjoying your new perfect home!