3 Ways Borrowers Can Sabotage Their Home Loans

No one wants money to stand in the way when their heart is set on owning a home. But all too often, borrowers pull last-minute moves that put their financing in jeopardy. Whether it’s an unidentified or unsourced deposit made two days before escrow or a capital expense that just surfaced, let’s explore three common ways borrowers can sabotage their home buying plans.

1. Changing Jobs

Sadly, one of the most tragic mistakes borrowers make is changing jobs and not documenting that change —- especially if it’s done between the time the loan is approved and the close of escrow. That’s because lenders perform a verbal verification of employment within 24 hours of funding a loan. Thinking of retiring? Think again. It’s best not to quit your job before your loan is finished.

2. Acquiring New, Undisclosed Debt

If your debt-to-income ratio is high and you go out and buy a new car, your loan could be hampered. (Remember, your debt-to-income ratio represents the total amount of monthly debt payments, including your house payment, divided into monthly income.) Lenders perform a pre-closing credit check, known as a credit refresh, immediately before funding a loan to make sure the borrower hasn’t overextended themselves at the last minute.

If you decide to take on new debt before your loan closes, you’ll need to provide a letter of explanation to the lender. Hard inquiries will also appear on the credit refresh, such as any request for a new line of credit.

3. Moving Money Around

If you’re going to make a down payment of, say, $50,000 to buy a house, every cent must be documented and sourced, whether it’s a transfer, payroll deposit, or tax refund. If the money was transferred from another account, say from savings to checking, then the lender would need to see two months’ worth of bank statements from the source. After all, lenders need assurance that the money didn’t come from an unacceptable source like a cash advance.

Finally, as with any new line of credit, it’s important to know where your credit stands long before you apply for a mortgage, as this will determine your eligibility for various rates. (You can view two of your credit scores, updated each month, for free on Credit.com.). And finally, if you have any questions about selling or buying a home in metro Albuquerque, be sure to contact me today!