“I can’t believe the deal fell out of escrow, it was supposed to close on Friday”. This was unfortunately what I heard from a friend’s brother over the weekend. He was very frustrated as a seller (I would say it’s because he didn’t use me to represent him) and now he has to pay an additional mortgage payment and put his home back on the market. I feel horrible for him but the circumstances are regrettably something I hear all too often. The buyer paid off a loan while in closing and their debt-to-income ratio changed. Because the buyer’s ratio changed, he no longer qualified for his loan, even though his credit was still very high. Below are some items to consider when you’re buying or selling a home, make sure that if you decide to not use me as your representation, your realtor and yourself stay on top of these items: -Don’t make any big career changes. Lenders weigh your salary and job stability when evaluating home loans. Changing jobs could derail a mortgage, as could a switch within a company from a salaried position to one where primary income comes from commissions or bonuses. -Prepare for a last minute credit check. Lenders will pull a credit check days before closing to make sure that your debt-to-income ratio hasn’t changed. This includes, but is not limited to: charging up credit cards, applying for a new credit card, missing payments, getting an auto loan, etc. -Watch out for closing-cost surprises. Closing costs could be as much as 3% of the cost of your new home. They are dynamic and change all the time. People often set aside money for their down payment and put all their cash into that, forgetting to set aside cash to pay for mortgage rate points or closing fees; this mistake could cost you your home. -Avoid any major purchases before closing your mortgage loan. Doing something like the buyer above did (paying off your car loan) will alter your cash reserves in which your approval was based on and cause your lender to pull the loan. Some have a tendency to think that just because they have a mortgage deal all lined up, the deal is done, but that’s not the case. Avoid making drastic changes to your bottom line, until you’ve signed on the dotted line! These are general rules and every situation is different. I always recommend that you use a Financial Advisor when seeking financial advice.
Posted on: Mon, 22 Jul 2013 22:54:24 +0000
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