Your Loan is Approved! Now Avoid These Four Pitfalls That Can Really Ruin Your Day
Posted by Paul Gonzales | Leave A Comment »
Your loan application has been officially approved by your lender and you are in escrow on your dream home. Just days before you expect to close your purchase and begin moving, your lender tells you that you no longer qualify for your financing. What happened?
During the typical thirty to forty-five day escrow, there is ample opportunity for the prospective home buyer to unwittingly sabotage his or her deal. These innocent mistakes can be grouped into four categories:
Credit Issues
Your initial credit report was good enough to qualify you, and then you went out and:
- forgot to make that dinky $18 payment on your J.C. Pennys account
- purchased a plasma screen TV with no payments due for a whole year (and now you have a new credit account with a subprime finance company)
- opened a new credit card or max’d out the balance on an existing card
- finally paid off that old traffic ticket that went to collection two years ago
Any one of these mistakes can have a dramatic effect on your credit score and disqualify you.
Employment
- you were a company employee, and now you are self-employed
- you still work for the same company but just switched from a salaried position to one that compensates you by commission or bonuses
- you have just made a significant career change, say from being an auto mechanic to a real estate agent
Lenders usually look for a stable employment and income picture for at least the last two years. Any significant change after your application is approved can start that “clock” over again
Income and Expenses
Your loan approval included a comparison of your present monthly consumer bills, together with the loan you requested, as a percentage of your monthly gross income, however:
- you or a spouse decided to switch from full-time to part-time
- you just made a major credit purchase such as a new car
- you have actually made no changes whatsoever, but you were qualified for a specific maximum loan amount to purchase a house. Now you want to buy a house or a condo that includes a $325 monthly homeowners association fee, or found a home in a neighborhood that has special tax assessments such as Mello-Roos.
Any significant decrease in income, or increase in expenses tied to consumer debts or the home purchase itself, can reduce the amount of financing you qualify for.
Financial Assets
Most loans require that the home-buyer have a minimum amount of financial assets such as money in the bank, investments or an IRA or retirement plan. Once approved, however, you:
- made a sizable cash purchase, such as furniture for the new home
- repaid a loan to Aunt Bethany
- took out a loan against your retirement plan
Your qualifying assets could fall below the minimum amount required to maintain your approval.
These mistakes are quite common and easy to make, because they involve normal activities and routine decisions that we make everyday. The key to avoiding any of these four major pitfalls is recognizing that your loan approval is like a photograph. It is literally a snapshot of you and your financial condition. Lenders will rely upon that snapshot right up until the time they wire the money to escrow, the title company records your new mortgage and your agent hands you the keys. There is nothing routine about that. So smile, look your best and stay “YOU” until your agent hands you those keys!
If you have questions or plan to purchase a home or investment property soon, call me at (760) 746-7388 or email me at paulforloans@aol.com
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Stop Making Mortgage Payments?…Don’t Make A Seller’s Mistake!
Posted by Kevin Kueneke | Leave A Comment »
The following is based on an actual conversation I had with a seller recently…
Question: I just accepted an offer on my home, can I stop making the mortgage payments?
Answer: NO!!!! If you are selling your home and you are concerned about your credit, it is in your best interest to continue paying all mortgage related debt on that property in a timely manner. Just because it will be paid off soon is no reason to stop making the payments. Becoming delinquent can cause several problems: 
- Once a mortgage loan becomes delinquent, payment and payoff processing is handled by a different department, namely the debt collection department. This can lead to additional fees and days added to the transaction.
- The most important credit item that lenders review (on par with the credit score) is housing payment history. Mortgage late payments can ruin your credit and make it difficult if not impossible to buy your next home. This can be an issue even if you only plan to rent.
- “I’m already approved for my next home, why should I worry?” Lenders have been known to re-pull credit and/or request an updated mortgage rating prior to the close of escrow especially if your file is a little on the older side.
- “My lender has several thousand dollars in my impound account, they can just use that to cover my payment.” Wrong. Lenders internally treat your account as two accounts: the actual loan and the impound account. The impound account is not used to subsidize shortages from the regular monthly payment.
Bottom line is that if you want to protect your credit, continue to pay your mortgage on time.
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