Avoid Last-Minute Mistakes When Finalizing a House Purchase
In the process of securing a mortgage, it's crucial to keep your finances steady and transparent until closing to minimize the risk of affecting your credit score or loan approval. Here are some key points to remember:
Stability in Employment and Income
Maintain a consistent employment status and income throughout the mortgage process. Lenders will verify your employment shortly before closing, so avoid changing jobs or reducing income during this period.
Avoiding Financial Changes
Avoid opening new credit accounts, taking on additional debt, or making large purchases on credit cards. These actions can lower your credit score and increase your debt-to-income ratio, which may impact loan approval.
Managing Bank Account Activity
Do not make large deposits or withdrawals in your bank accounts without documentation. Lenders will review your bank statements again before closing to confirm no unusual activity that might concern them.
Responding to Lender Requests
Promptly respond to any lender requests for financial documentation to prevent delays or concerns about your financial stability.
Reviewing Credit Reports
Review your credit report ahead of time and address any errors, missed payments, or high balances to strengthen your position.
Managing Debt-to-Income Ratio
Keep your debt-to-income ratio around or below 36%, if possible, for a stronger loan application.
Avoiding Major Financial Changes
Avoid making large purchases or significant changes to your lifestyle before closing on a home, as they can impact your debt-to-income ratio and potentially affect the mortgage approval.
Closing Day Considerations
Closing on a mortgage is time-sensitive. Submit all paperwork on time and respond quickly to any requests for additional information to keep the process moving forward.
Final Walkthrough
Conduct a final walkthrough before closing to ensure the property is in good condition or that any requested changes or repairs were made.
Avoiding Major Purchases
Avoid making major purchases, including furniture, before closing on a mortgage, as they can lower your credit score and affect the interest rate and loan amount.
Special Considerations
If you're getting a mortgage while on maternity leave, you might need to take a few extra steps to prove your employment to your lender.
Lenders reassess a few key criteria before officially closing on a loan, including your credit score, income, and debts, to ensure nothing has changed since the initial application.
The Closing Disclosure
The closing disclosure, a summary of the loan details, is provided at least three business days before closing and includes the home's purchase price, origination fees, interest rate, closing costs, and a breakdown of the exact closing costs.
The Closing Process
The closing process involves executing all required documents in the presence of a notary public. Once the lender verifies everything was executed and initialed correctly, they will authorize the title company to finalize the transaction and disburse funds.
Planning the Closing Time
The buyer's lender will communicate with the real estate agent to plan a closing time for all parties.
Covering Closing Costs
A cashier's check is typically required to cover the closing costs.
By following these guidelines, you can prepare your finances before closing on a mortgage and ensure a smooth process.
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