More than once I have seen buyers become frustrated with the mortgage process. Most of the time it is not their fault. Unfortunately, there are many ways a mortgage can be sabotaged and it is important that the buyer stay in constant contact with their mortgage consultant. Even then, one can run into problems. Do not ever take for granted that a bank employee has told you that everything is under control. The underwriting department can still throw in a monkey wrench. There are things you should know that the bank can use as an excuse to deny a loan, even after you have been approved.
Common Mistakes that Buyers Make
Do not make a big purchase during the loan process. Big purchases, such as a new car or furniture, can change the buyer’s debt-to-income ratio that the lender used to initially approve the buyer’s home loan.
Do not open any new credit. Buyers should avoid new credit card applications between approval and closing.
Do not miss payments on any credit card, installment loan or outstanding bill. Even bills in dispute should be paid on time between loan approval and closing. Sometimes you have to “bite the bullet” and wait until after the loan closes to fight an incorrect bill. You don’t want a $100 dispute to cause you to lose your deposit and the home you intend to buy.
Do not cash out accounts. Avoid transferring large sums of money between bank accounts or making undocumented deposits – both could send up “red flags” to a lender. If you must close an account to make your down payment, discuss this with your mortgage consultant well ahead of time and have the documentation needed.
If you follow every step required of the bank, keep them informed of any large transaction and have all your documentation you should be fine. Don’t give them a chance to make your life difficult.