The Last Minute Credit Check
Your actions after
receiving lender approval for a mortgage loan can disqualify you for the
loan. A mortgage loan is conditionally approved, with the lender reserving
the right to re-verify credit, income, assets and employment at anytime. The
lender may cancel the loan if there are any adverse changes to your
Your debt-to-income ratio is your gross monthly income divided by the amount you spend on debt. Debt items include mortgage payments (including principal, interest, insurance, tax), car payments, credit card payments, student loans, child support payments, etc.
The lender considers
debt-to-income ratio when approving you for a mortgage loan. Only 28 percent
of your income can be used for your mortgage payment, which includes taxes
and insurance; and 36 percent for the mortgage payment plus the rest of your
debt. Anything you do to negatively affect your debt-to-income ratio may
change an "approval" to a "disqualification."
Avoid Red Flags
A red flag is any
inquiry made regarding your credit worthiness. If you decide to purchase a
big ticket item - like a car, boat or furniture - prior to closing, you're
at risk of having a red flag show up on your credit report.
Keep Your Money Where It Is
The balances of your liquid assets are considered when approving you for a mortgage loan. These liquid assets may include checking accounts, savings accounts, certificates of deposit, money market accounts, retirement accounts, stock and mutual funds.
Avoid changes to the
balances of these accounts. Do not close accounts. Do not change banks. A
large withdrawal or deposit to any of these accounts will trigger a red flag
for your mortgage lender. If a red flag is triggered, you may be asked to
produce a paper trail tracking large withdrawals and/or deposits.
For most employees a
change of jobs to one of equal or higher pay will not trigger a red flag.
However, sales people should not change jobs prior to closing on
their mortgage loan.
Talk to Your Loan Originator
Do not make any changes to your financial and employment status without first talking to your loan originator.
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