You’ve made the decision to buy a home. Congratulations!
From now until you close, your actions matter to your lender. Here’s a helpful list of do’s and don’ts to keep you “moving” while you’re buying a home:
DON’T – Make any sudden career changes.
If you are contemplating changing jobs, talk to your loan officer. Generally, it isn’t advised until you close, but may be allowed for the right upward position. In addition, this is not the time to start a new business since you will then need tax returns filed for your bank to consider it. Income stability and predictability are crucial for loan approval. Love your job…at least for now.
DO – Start filing and stop shredding.
Your lender will be very interested in your income and deposit history, so save those pay stubs and bank statements. Online statements are often easily obtained but may take a little digging for more than summaries. What you received in the mail in the “old days” is what your lender will need a copy of electronically. Every. Single. (Sometimes strangely blank) page.
DON’T – Close bank accounts.
Your lender will be documenting your deposit history at least two months back and perhaps more than once. If you close old accounts mid-process it can be very difficult for you to obtain the documentation your lender will need. Remember that stability thing we need to prove? Your bank will be excited to have you as a customer for ALL your banking needs, but keep your account records accessible until the end, just in case.
DO – Prepare to explain large deposits.
If a monthly deposit totals more than 25% of your monthly income and isn’t clearly payroll, lenders are required to have you paper trail the source of funds. To keep the process going smoothly, it is best not to move large sums around at all. If you sell something, copy everything. Essentially, your lender needs to rule out undisclosed loans or inadmissible funds. And while you may find security in keeping cash at home, know that “mattress money” needs to be banked and seasoned for us to consider it.
DON’T – Make any major purchases (or co-sign) anything that requires financing.
If you don’t have true need, hold on financing that new large ticket item. You’ll be required to explain any recent credit checks and we’ll ask you more than once if you’ve obtained any new debt since applying. Co-signed debt is often counted against you even if someone else promises to make payment. Be upfront early and spare your lender and realtor an audible gasp at closing by telling us about new loans on the big day. That gasp may be the first sound of a closing being halted.
DO – Save ahead for more than your down payment.
Reserves are important. In addition to your down payment, you’ll have expenses of closing costs and perhaps a requirement for several months of reserves of payments above and beyond. If savings are limited, discuss low-down-payment options that may be available to you. There are still programs for less than 20% down, and no PMI doesn’t stand for Pretty Much Impossible (it stands for Private Mortgage Insurance). You may be more ready to buy than you think!
DON’T – Open or close any credit cards.
Opening new credit trade lines can lower your credit score since you don’t yet have a proven history of payments. Closing old trade lines can lower your credit scores if you depended on the age of your overall credit. Remember – trends are your friends. That brand new airline card may earn you a flight to Cancun but cost you on your mortgage rate.
DO – Trust your mortgage professional.
Your realtor understands that their success depends very much on your lender’s experience and guidance of their buyers. If they didn’t believe you were in good hands, they wouldn’t have recommended your lender. Have faith that your loan officer wants nothing more than to see you smiling as you receive the keys to your new home. Your joy is why we do what we do.