9 THINGS THAT COULD KILL OR DELAY YOUR CONTRACT TO PURCHASE
To be completely honest, there are very few processes in life that compare to the rollercoaster of obtaining a mortgage. There are so many factors involved that make the processes very complex and sometimes complicated. In order to make sure things run smoothly, here are a few things to avoid doing while you are under contract.
- Don’t buy a new car:
New debt comes with new obligations. New obligations create new qualifications.
For example: A new car loan of $25,000 at 5.25% for 60 months has a payment of $475. This is the same as 5.25% rate on 30 years for an $85,000 home loan. Basically, a $25,000 car note can lower your house loan approval amount by $85,000. If you were originally approved for a $200K home loan, your loan has now been lowered to $115,000, which likely would not work.
2. Don’t bounce a check–This one is obvious.
3. Don’t deposit cash into your checking account:
Saving money can be difficult. Often savings can be in the form of cash and saved at home in your sock drawer. But, the time has come and you need that cash for your down payment, so you deposit it. After providing your new bank statements to your lender, they will ask and need documentation of the source of the cash. This can be a major hassle. Same thing goes if you sell your camper on craigslist for $5,000 and are paid in cash. Document everything you can. Get copies of the bill of sale etc. to provide to your lender. Discuss the proper way to track your assets with your loan officer.
- Don’t close or lower the spending limit on credit accounts, unless advised by your lender:
Over the years you have always paid your credit card timely and your limit has gradually increased. You use your card responsibly, but do have a small balance of $800. Originally, it started out at $1,000, but the limit has increased to $10,000. Call the credit card company and say please just move my limit back to $1,000. When this happens your debt ratio becomes 80% instead of 8% which can lower credit scores.
- Don’t make large purchases:
Large purchase kind of go hand in hand with buying a house. Be cautious and try to make these after you have closed.
- Don’t use department store or low credit limit cards:
Going back to school shopping at a department store that only has a $500 limit can hurt your credit more than you realize. Even though it has no balance because you only bought a few outfits for the family that you can easily pay off later, your credit report will still show that you have “maxed out” a credit card. Your credit is always checked again just before the closing, and when it shows that you “maxed out a credit card,” your account will be flagged, which can drastically lower your credit score.
- Don’t switch jobs:
Lenders require the ability to repay the debt, which is most often a job. If you switch jobs, it can be very complicated, especially if you move to a different industry or pay schedule. Paycheck stubs or auto deposit records from your bank statement take time to acquire. Always consult with your lender prior to making any employment changes prior to closing.
- Don’t let your bank account balance drop lower than your cash needed for down payment and closing costs:
If you don’t have the money in your account(s), then how are you going to afford to close? Even if you have another plan, this is how lenders see the situation. The exception is if you are using funds from selling another house and those funds are being transferred to the purchase of the new house.
- Don’t post too many details on social media about your purchase:
I am primarily a listing agent and I will use an actual example of how this can harm a buyer. A buyer gets home under contract and is excited and posts: “ We are buying our dream home!” Within a few days, they have the home inspected and some repair items of a few thousand dollars were discovered. The buyer then requests that the seller pay for these items. During the process, I check Facebook to see that the buyer has posted: “Inspection went ok, some minor things but we are going to buy it either way.” In this case, the seller was willing to pay all or part of the costs to repair the items. Once I showed the buyer’s post to them, the seller quickly realized how invested the buyers were and ultimately decided to decline the buyer request. Sure enough, the buyer was willing to buy the property regardless. Unfortunately, the excited buyer paid for things he could have avoided if he had not shared so much information.
Stay patient, organized and focused. Homeownership is one of the best ways to grow wealth. Put forth your best effort from contract to closing. Always communicate with your lender– any major purchase or shift in funds should be reviewed by an expert as you will want to keep your account looking as positive as possible up until your closing. Remember to listen to your lender and REALTOR and always ask questions as they arise.
Rett Harmon Century 21 Novus Realty #theNovusWay
Rettro Group – Redefining Your Real Estate Experience