Anymore, a mortgage application lives and breaths, is a fleshy thing demanding each and every piece of documentation in your financial profile and is quite unwilling to die until, at the closing table, is stabbed on the dotted line with your signature. So that you are victorious in your endeavor, here are a few pitfalls to avoid.
1. Falling out of Communication
You've completed the application, provided the requested documents and brush your hands of further responsibility. Yet, terminating communication is a great way to cause yourself grief. Your lender is bound to need something along the way. A mortgage file must be kept current and may require updated pay stubs or bank statements. Make sure to stay in touch.
2. Marriage or Divorce
Congratulations, you married your true love a week prior to closing. But, since you didn't tell your lender, everything fell apart at the last minute. Why?
Life changing events such as marriage or divorce alter loan scenarios. For example, FHA loans in community property states require the spouse's debts to be listed on the application even if the spouse is not on the loan. This additional debt might wreck your approval.
Or, in the case of divorce, lenders will not allow you to close until everything is settled by the court. Additional debts such as child support or alimony must be included in your debt-to-income ratio. If you plan on a life altering event clue your loan officer in as quickly as possible.
3. Changing Asset Sources
Originally, you decided to pull the down-payment money from your 401K until dear old granny offered you a gift instead. But not all assets are created equal, and neither is the documentation required to verify them so changing the down payment plan changes the loan approval. Planning ahead will help avoid disaster in the end.
4. Credit Use
That new leather furniture was irresistible. So was that 52 inch plasma television. Oh, and those new appliances! So, you maxed out your Discover card and opened a retail line of credit to buy them. Then you found out it obliterated your approval and regret creeps into your gut like last night's Buffalo wings. Credit is a major part of our lives but remember that your loan is a living, breathing entity and it knows everything you do. Everything. Your lender pulls a soft credit report within three days of your closing and looks for credit changes. Whether new credit or a balance increase the change in payment will affect your debt-to-income and possibly your approval.
5. Loan Changes
You wake up in a cold sweat. Junior's tuition bill is due in two weeks and you need to reduce your down payment. A significant decrease in down payment or drastic loan changes will send your loan into a tailspin. Disclosures, followed by a waiting period, are often required for significant loan changes and can delay your closing if made at the last minute.
6. Job Changes
Remember when Johnny stuck that stick through the spokes of your moving bicycle? Well, be prepared to flip head over handlebars if you decide to switch jobs during your loan approval. Lenders perform a verification of employment within a week of closing and sometimes a verbal verification the day of funding. If you quit and didn't tell your lender the bruises Johnny caused will pale in comparison.
Remember that your loan is a living, breathing beast that stares at you in your sleep.
Be very careful what you change in your financial profile.
If you must make a change, contact your lender immediately for advice.