Do you know these six things not to do while you are under contract? Once you find your dream home and you get approved for a loan, you may think that you are ready to coast into closing. While the first part of the home buying process is taken up with things that you have to do, the last few weeks are filled with some things that you MUST NOT do!Below you’ll find the six things not to do while you are under contract – but I still see borrowers commit most often after they’ve been pre-approved for their financing to buy a home. Hopefully, by sharing them here I can help you avoid them as you move forward with your mortgage financing and home buying.
The six things not to do while you are under contract are:
1. Issue: Accepting a gift or check for the Earnest Money written by someone NOT named on the Real Estate Contract or the Mortgage Application
Tip: If YOU are the buyer and mortgage applicant, the Earnest Money check should be written from YOUR funds. The best way to look at the Earnest Money check is that it is an advance on your Down Payment … or the funds you will need to Close on your loan.
Be Aware: Checks from Non-Borrowing, Non-Buying parties can cause problems!
2. Issue: Transferring monies/funds needlessly or repetitively from one bank to another … or from one account to another (even if transferred within the same banking institution).
Misconception: That all funds needed to cover down payment and closing costs (known as “Cash to Close”) must be accumulated, or deposited, to one (1) account.
Truth is: Separate accounts, separate investments, separate banks can all be verified and documented … and their collective balances … can be totaled to demonstrate the needed Cash to Close (funds needed for Approval/Closing).
3. Issue: Just before applying for their mortgage, borrower(s) work fewer hours while conducted their home search and contract negotiations.
Note: For those borrowers working hourly-paid employment, this issue is of special importance. Mortgage Underwriters look unfavorably at low year-to-date Gross Incomes reported on the most recent pay stubs required for Mortgage Application.
4. Issue: Borrowers accept “Cash” or “Gifts of Cash”, then deposit it into the banking account for which the funds for Closing later get verified.
Important: Cash has NO acceptable means of being verified or counted as acceptable funds to Close by a Mortgage Underwriter.
Tip: Stop depositing cash into the accounts that you have designated and provided for Mortgage Application.
5. Issue: Borrower(s) change jobs prior to … or after making … application for their mortgage.
Important Advice: Do NOT change employment in any way prior to consulting with me, your Loan Officer. Consult with me, even if it’s for a better job!
Why: It could matter (greatly) to a Mortgage Underwriter.
How does it matter?
In terms of job history
Employment length of time
Verification of income (especially at the new position or new employment)
Remember the old saying, “It’s easier to ask forgiveness than it is to get permission?”
When entering or navigating the mortgage process, that is definitely NOT TRUE.
Always … always … check with your Loan Officer prior to making any decision or taking any action. It’s much easier, less stressful, and quicker to do things right the first time and not have to backtrack or perform “clean-up” later.
Issue: Running Up Your Credit Card Account(s) to Furnish Your New Home
Why? Your lender is going to pull your credit again right before closing. If you have charged new furniture, appliances or made any other major puchases on credit, you may have just tanked your debt to income ration. You may not qualify now for your new home that you were already approved for. This may be the most important of the list of six things not to do while you are under contract!
By talking to, then following the advice of your Loan officer, you’ll avoid the six things not to do while you are under contract. And THAT is at the top of my wishlist …
DOES THIS ALL SOUND CONFUSING? Come to our first time homebuyer seminar!
* Looking for financing answers, options, solutions, and experienced assistance? Please join us at 7 pm on January 15 at my Keller Williams Capital Properties office across from Wilson High School at 4646 40th St NW for our first time homebuyer seminar. David Lumb with George Mason Mortgage will be there to answer all your questions. The session will run for about an hour and a half.