If you don’t know the worst things for your mortgage closing, you could potentially jeopardize your chances of buying a home. The mortgage closing is the final step in the homebuying process. It can take up to 30 days to close on the mortgage loan however, certain actions can ruin the entire closing. Here are seven worst things for your mortgage closing.
1. Using Your Credit Card Excessively
One of the worst things for your mortgage closing is excessive credit card use. As you wait to close on the loan, you may use your credit card to buy appliances, furniture or decorations for your new home. If you go overboard, these purchases may increase your debt to income ratio, potentially impacting your mortgage approval.
2. Applying for a Loan
Like a credit card, applying for a loan before closing on a house can increase your debt to income ratio. Some people mistakenly finance cars before their scheduled closing. However, lenders re-evaluate debt to income ratios the day before closing. Any new debt will compel the lender to recalculate your debt to income ratio. If your ratio is over 43%, they may cancel the closing.
3. Spending Your Cash Reserves
The down payment and closing costs may be your biggest headaches. Nowadays, many lenders require a two or three month cash reserve in order to close on a mortgage loan. This is cash in the bank after paying your down payment and closing costs.
4. Changing Jobs
Switching employers during the home buying process won't necessarily wreak havoc on the closing, but this can slow the process. The mortgage lender has to recheck your background to make sure that you still qualify for the mortgage loan. If your income remains the same, you shouldn't have any trouble closing, but if your new income is lower than your present salary, the bank may cancel the closing.
5. Quitting Your Job
Your boss may be a jerk, but this isn't the time to walk out on your job. Leaving your employer – without another job – is the fastest way to ruin the mortgage closing. If you're thinking about making a move, or perhaps becoming self-employed, wait until after you close on the home.
6. Missing Payments
About 24 hours before the closing, your mortgage lender will pull your credit report for the final time. If you miss or skip any credit card or loan payments after you’re initially approved for the mortgage, this information may appear on your credit report. Banks do not tolerate delinquencies, and this single action can ruin the entire closing.
7. Underestimating Closing Costs
You are required to play closing costs, and unfortunately, you won't know the exact amount until a few days before closing. The good faith estimate is just that – an estimate. This document will list closing costs, but you may pay a little less or a little more. Plan in advance and make sure you have enough set aside.
Getting a mortgage loan is tough, but it’s especially harder if you don't know what to expect. A mortgage approval is only the first step, and anything can happen between the approval and closing. But if you follow this advice, nothing will stand in your way of getting the house.
How did you prepare for your mortgage closing?