(3 minute read)
Photographer: Luke Sharrett/Bloomberg
There are lots of things that you should not do after you apply for your mortgage so picking just a few to discuss here is no easy task. But it is safe to say that if you do anything that has anything to do with your credit or your work or the money you have planned for the down payment and closing costs, proceed cautiously and talk to your lender representative. I mean first, before you do anything, talk to your lender rep.
Spending the time and effort it takes to discuss potential mortgage approval land mines with your lender rep before you do anything, may head off unnecessary closing drama. Changing jobs, buying stuff and temporary loans to family may be okay, but just in case, play it safe, call and find out how best to proceed and what may be needed to document whatever it is you have planned. That being said, you should not be constrained by your role as a mortgage applicant when an opportunity arises to improve your quality of life.
But first and foremost, don’t buy anything big, don’t lend any money, don’t borrow any money, don’t change jobs or do anything that could bang up your credit score without talking to your lender rep to see what the affect will be on your mortgage candidacy.
Just to be clear; talk to your lender rep, talk to your lender rep, talk to your lender rep; consider that the Golden Rule.
Buying a house is an exciting event and it is easy to be swept up in the imagining of life in your new home. Painting, furnishing, landscaping and all sorts of home improvement thoughts add color to what the future will look like after move-in day. Advertisements for home improvement and furniture stores suddenly seem to be everywhere offering blockbuster, once-in-a-lifetime deals that you just can’t pass up. Shopping for furniture bargains and opening up home improvement store credit cards before closing on your new home, might seem like great ideas to be ready for life as a brand new homeowner. But not so fast.
Furniture can be expensive, so can big appliances like refrigerators and washers and dryers. Paying cash may reduce the assets you need for your down-payment, closing costs, escrows and reserves. If you decide to use credit cards, you may end up increasing your monthly debt payments and you may no longer qualify for the mortgage you were pre-approved for to buy the house in the first place. Your credit score might suffer because now you have a balance on a credit card or a credit inquiry from that home improvement store credit card that you just had to get.
Don’t buy big stuff until after you close. It may be better to pay a little more because you missed the never-to-be-seen-again sales, then to have gotten great deals on furniture and appliances for a house you can’t move in to because you no longer qualify for the mortgage.
Changing jobs is a definite talk-to-your-lender-first issue. Not to help you decide whether you should take the job but just to manage the logistics and timing of employment verifications and paystubs and offer letters and whatever else might be needed to paper your file. Career decisions should not be predicated on the timing of your mortgage financing, but mortgage financing can be made complicated when there is a mid-stream job change.
As long as the job is in the same industry and the form of compensation is similar and all things considered are the same or better, have at it. But if the job is in a different industry or the compensation is different in form from how you get paid now, there may be issues. A regular salaried job is different from hourly wages, commission income, draw against earnings, or anything that is not plain old ordinary W2, regular paycheck income. Pick up the phone, call your lender rep, send an e-mail and get clarification. You may get that great new job but you may torpedo the mortgage approval process.
Buying or leasing a new vehicle can also add some zig-zag to the mortgage approval process. The new monthly payment needs to fit in to those lender approved qualifying ratios; otherwise that shiny new car may never see the inside of your new garage. And even if you are just swapping out the payment for your old car with the payment for your new car, there is credit reporting and new loan or lease paperwork that your mortgage lender will need to see. Call your lender rep, get some guidance, weigh your options, then proceed.
Or wait.
Even uncomplicated, straightforward borrower profiles have to navigate the mortgage approval machine and all of the moving parts that lead to successful, drama free approval. Managing the couple of months it may take to go from contract to closing is best done with lots of information and help. Call your lender rep because mortgage approval is a team sport.