Over the years, I’ve developed a CLIENT FIRST guiding principle that emphasizes accessiblity, attention to detail, effective communication and meeting customer’s needs. Sometimes, this can involve advising or even assisting with the financial end of a real estate transaction.
This article The 10 Don’ts of Mortgage Closing was included in a mortgage newsletter from Lisa Upshaw, a local mortgage professional in Burlington. She compiled this compendium of don’ts from a variety of sources. I asked her permission to re-post these don’ts in our blog because they are so important.
Here is a list of things you should NEVER do in the time between the financing complete date (when everything is setup and looks good) and your closing date (the day the lender actually advances funds).
In fact, never make changes to your financial situation without first consulting your mortgage broker. Changes to your financial situation before your mortgage closes could actually cause your mortgage to be declined.
Mortgage Financing: 10 Things Never To Do
1. DON’T QUIT YOUR JOB.
This might sound obvious, but if you quit your job your mortgage broker will have to report this change in employment status to the lender. From there you will be required to support your mortgage application with your new employment details. Even if you have taken on a new job that pays twice as much in the same industry, there still might be a probationary period and the lender might not feel comfortable with proceeding.
Discuss any employment changes with your mortgage broker to see if there could be any negative complications.
2. DON’T DO ANYTHING THAT WILL REDUCE YOUR INCOME.
Similar to #1, don’t change your status at your existing employer. Getting a raise is fine, but dropping from full-time to part-time status is not a good idea. The reduced income will change your debt service ratios on your application and consequently your ability to qualify.
3. DON’T APPLY FOR NEW CREDIT.
It’s easy to get excited about your new home, especially if this is your first, however now is not the time to go shopping on credit or take out new credit cards. So if you find yourself, shopping for new furniture and they want you to finance your purchase right now… don’t. By applying for and taking out new credit, you can jeopardize your mortgage.
4. DON’T GET RID OF EXISTING CREDIT.
In the same vein, as #3, it’s best not to close any existing credit either. The lender has agreed to lend you the money for a mortgage based on your current financial situation and this includes the strength of your credit profile. Mortgage lenders and insurers have a minimum credit profile required to lend you money. If you close active accounts, you could fall into an unacceptable credit situation.
5. DON’T CO-SIGN FOR A MORTGAGE FOR SOMEONE ELSE.
You may have the best intentions in the world, but if you co-sign for any type of debt for someone else, you are 100% responsible for the full payments incurred on that loan. This extra debt is added to your expenses and may throw your ratios out of line.
6. DON’T STOP PAYING YOUR BILLS.
Although this is still good advice for people purchasing homes, it is more often an issue in a refinance situation. If you are just waiting on the proceeds of a refinance in order to consolidate some of your debts, you must continue making your payments as scheduled. If you choose not to make your payments, it will reflect on your credit bureau and it could impact your ability to get your mortgage. Best advice is to continue making all your payments until the refinance has gone through and your balances have been brought to zero.
7. DON’T SPEND YOUR CLOSING COSTS.
Typically the lender wants to see you with 1.5% saved up to cover closing costs. This money is used to cover the expense of closing your mortgage, like paying your lawyer for their services. You might think that because you shouldn’t take out new credit to buy furniture, you can use this money instead. Bad idea. If you don’t pay the lawyer, there will be no house to deliver the furniture to.
8. DON’T CHANGE YOUR REAL ESTATE PURCHASE CONTRACT.
The are times after purchasing a new property that things will show up after the fact on an inspection and you might want to make changes to the contract. Although not a huge deal, it can make a difference for financing. Even if financing is complete, check with your mortgage broker if you want to make changes to to the purchase contract.
9. DON’T LIST YOUR PROPERTY FOR SALE.
If your mortgage broker has set up a refinance for your property and your goal is to eventually sell it… wait until the funds have been advanced before listing it. Why would a lender want to lend you money on a mortgage when you are clearly going to sell right away (even if it’s a short-term loan)?
10. DON’T ACCEPT UNSOLICITED MORTGAGE ADVICE FROM UNLICENSED OR UNQUALIFIED INDIVIDUALS.
Although this point is least likely to impact the approval of your mortgage status, it is frustrating when people, who don’t have the first clue about your unique situation, give you unsolicited advice about what you should do with your mortgage, making you second guess yourself.
Thanks Lisa.. By the way, #10 also pertains to real estate professionals. If you’ve hired a professional to act in your interests, then take their advice. Your friends, family and neighbours no doubt will have lots of other experiences and great advice, but your REALTOR® is the one that always, has your best interests in mind.
We would be thrilled to work with you on your next real estate transaction. Contact us Today!
Karen Paul & Associates | Real Estate
905-333-6234 | karenpaul.com | firstname.lastname@example.org
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