My Mother coined this phrase and I love it, “life is what happens when we are making other plans.” For the person that plans everything how true this is, you are going to buy your first home, you have been pre-approved and are in the mortgage qualification stage. Your career is where you envisioned and planned for years earlier. You are reaping the rewards of goal setting and have been encouraged from your credit report and are going to purchase a new home or another bigger or more spacious or luxurious home. Success as you had imagined and when one good thing happens it seems another is shortly on the heels. LIFE IS GOOD! You being the strategic planner have been given a pre-approval and are in the midst of mortgage qualification for this new home purchase and are feeling confident. Your credit score is strong and have been praised for good payment history and minimal debts. When one good thing happens another seems to follow. Your mind begins to consider acquiring that new car, that ski boat, or my personal favorite that Harley Davidson Motorcycle. You have put these types of thoughts out of your head for years but now you have proof in your credit repor, you can indulge in one or more of these things! You deserve it!
STOP ! Hold on lets discuss this first! Are you in the midst of a mortgage qualification? One of the biggest mistakes potential homeowners make is a purchase and a new consumer loan in the middle of a home mortgage qualification process. Making a big purchase will change your financial strength for the worse. When you make a purchase for a car, boat, motorcycle or even furniture this means you have more obligations in the way of license, insurance and maintenance and less cash for emergencies. Often people think once their credit report is pulled and they are given a pre-approval or maybe the mortgage qualification process has passed through the underwriting and you are waiting for a closing date that making a major purchase will not hurt anything. This is just not true, just prior to closing another Credit Report will be pulled and even if you have not officially made another purchase any inquiry to your credit will show up. Even for new furniture to fill the rooms in the new home or window treatments such has blinds, don’t make any of these purchases until after the closing. A new consumer loan will affect your credit score and your debt to net income ratio that served as the basis for your mortgage approval. Even an inquiry will raise concerns from the lender and any of these could easily put a stop at best a stall on your new home purchase.
Another mistake made during the mortgage qualification process is a job change. You would think that getting a job with higher pay and better benefits would improve a person’s standing with the mortgage underwriters. Sadly, it will not, changing jobs will have the opposite of the expected. Underwriters look at a job change as a negative, lenders place a high value on stability. All verification of employments (VOE’s) sent to your employee will ask how long you have been with the company and some even request how long you have been in your current role. There is more than one VOE, there are multiple VOE’s sent during the qualification process and often the last VOE is a verbal just prior to closing. Lenders like to see 2 plus years of continuous employment with the same job and will have a higher chance of getting approved than folks that move around often and change jobs every 18 months. If you have a received a pre-qualified letter from your mortgage lender, my advice would be to stay with to the current job until you close the home. Changing jobs may not kill the deal but it will definitely stall the process.
This last mistake goes against my personal being but no less it is a fact and my opinion means nothing. During the mortgage qualification process and reflecting two paragraphs to the above example, adding additional debt is a bad thing, and will affect your FICO credit score. On the other hand if you suddenly pay off a few small credit cards and close down the account that you have kept for the last several years it makes lenders nervous. Closing an established line of credit you have had for years suddenly can actually decrease your beacon scores. You have been pre-qualified and a lot of attention is given to the type of debt you have used in the past and how you manage it. Suddenly you pay off these and closing them changing your historical habits makes lenders curious. Life is what happens when you are making plans, in this instance until you close keep doing what you are doing.
The simplest and best way to handle your financial affairs after during the mortgage qualification although you have been pre-approved for a mortgage is do what you have always done. Continue to make all of your payments on time, continue to contribute to your savings or 401K plans. DO NOT Finance anything, in fact as I mentioned do not allow any inquiries of your credit. Do not change employers, even consider the affect of changing job titles at your current employer. Changing jobs in a new field scares lenders. After you have been handed the keys after closing on your new home you can make some of these changes.
The Larry Stepp Team at Gustan Cho Associates and partners with Bob Vogal, “Magic Bob” at Loan Consultants have years of experience. We will not discount and turn away people that have experienced life situations and have credit challenges to overcome, we also have Credit Repair professionals we can refer and guide through the obstacle course of the Mortgage Qualification. We are available 7 days a week, holidays and weekends.
Larry Stepp 407-922-4755 LarryS.HomesNetwork@gmail.com