Current mortgage rates are cheap these days. The recent drop in rates has contributed to a rise in U.S. home sales and has sparked a home refinance boom, led by homeowners jumping on new, lower interest rates. Even better, it’s getting easier to get approved for a mortgage as lenders loosening loan guidelines and reduce minimum required credit scores. There are even new low-down payment loans being introduced, including Fannie Mae’s 3% down HomeReady program. For many applicants, though, it’s not the getting a mortgage approval that’s the hard part about buying a home, it’s keeping the mortgage approval. There are a handful of land mines in the mortgage approval process. You’ll want to stay clear of them to have your best chance at getting a mortgage loan approved.
Mortgage approvals take time. In a typical home loan market, 45 days is normal time frame. The time to get an approval, though, can change based on the market environment or how “complicated” a loan might be. For example, when mortgage rates are low and there’s a refi boom on-going, closing on a loan takes as long as two months. Loans for the 5-10 Properties Program, which require additional paperwork, may delay the process further. Sometimes, banks just can’t work that fast. Closing times can also be delayed for buyers of short sales and foreclosures. Loans for distressed sales and REO can take 6 months or longer to get to settlement.
The thing is, during that “extra time” it takes to close, whether it’s 3 weeks, 3 months or longer, your life is subject to unexpected change. When your life changes, your loan can change, too. For example, if lose your job, become ill, or have your home damaged by storms, your lender can rightfully revoke your mortgage approval, even if your loan was previously cleared-to-close. Some life events are beyond your control. You can’t control sickness any more than you can control Mother Nature. But some events are within your control. In the world of mortgages, good behavior does matter when it comes to getting a a mortgage loan approved.
Keeping “good behavior” in mind, here are 8 things you should absolutely not do between your date of application and your date of funding. Any one of them could force a revocation of your mortgage approval.
Ignore these rules at your own peril.
- Don’t buy a new car or trade-up to a bigger lease
- Don’t quit your job to change industries or start a new company
- Don’t switch from a salaried job to a heavily-commissioned job
- Don’t transfer large sums of money between bank accounts
- Don’t forget to pay your bills, even the ones in dispute
- Don’t open new credit cards, even if you’re getting 20% off
- Don’t accept a cash gift without filing the proper “gift” paperwork
- Don’t make random, undocumented deposits into your bank account
Now, you may find it 100% impractical to have follow these rules to the letter. I know that. For example, if your car lease is expiring, you have to do what you have to do. Renew the lease. Before doing it, though, check with your loan officer, spreading your lease over 60 or 72 months may be better for your debt-to-income (DTI) ratio. The same goes for accepting cash gifts from parents. There’s a right way and a wrong way to accept a cash gift for a purchase and if you do it the “wrong way”, your lender may disallow the gift and deny the loan. These are just 8 of the behaviors which could sabotage your loan. There are more, of course, and a lender will help you identify them.
Today’s mortgage rates are low, raising the number of days required to close a loan and leaving more time for “things to go wrong”. Don’t let your mortgage get un-approved. Be smart while your loans in process and get your mortgage loan approved today.
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