True or false? All’s fair in buying and selling.
All of us remember the 2003 hit rom-com with Kate Hudson and Matthew McConaughey, How To Lose a Guy in 10 Days. Andy Anderson (Hudson), Composure magazine’s how-to girl, is writing an article about the things women do to ruin their chances with men: talking about marriage and children too soon, calling them by embarrassing pet names, moving into their medicine cabinet, crashing poker night, etc. She picks advertising executive Benjamin Barry (McConaughey) as her test male, however, Ben has just entered a bet to make a woman fall in love with him in 10 days. Only in the movies, folks.
We all know how the movie ends–they end up falling in love despite Andy’s numerous attempts to sabotage the relationship. If only it worked like this in the Richmond, VA real estate market. Unfortunately, there aren’t always happy endings when buyers aren’t prepared for the underwriting process and inadvertently sabotage their chances of homeownership.
Even though you have been pre-approved, if you don’t follow your lender’s and Realtor’s tips, you could end up losing your house before you sign on the dotted line. Here are 10 ways to lose financing on your dream home.
How To Lose a Home in 10 Ways
1) Open New Lines of Credit | Lenders must adhere to strict debt-to-income ratio requirements. If you add a new car payment or credit card payment to the mix after you have been pre-approved, you debt-to-income ratios may now be too high to qualify for the proposed housing payment.
2) Run Up Balances on Current Credit Cards | Even if you don’t open new lines of credit, charging a substantial amount on a current card will raise the minimum monthly payment on that card your lender is using for financing. Again, this could mess with your debt-to-income ratios.
3) Spend Down Payment Funds | Even if your lender verified down payment funds prior to your pre-approval, if your balance decreases to less than what you will need at closing and your lender requires new bank statements, this could cause a major delay in your closing date. If you’re closing on a short sale with a hard deadline, you could end up losing the house if you cannot close in time and aren’t able to obtain an extension.
4) Lose or Switch Jobs | Not much explanation needed here. If your qualifying income is no longer coming in every month, closing on your house isn’t going to happen unless you have a co-borrower who can carry the payment on his or her own.
5) Make a Late Payment on Your Credit Report | If your credit score is barely meeting the minimum threshold, one late payment could knock you out of the qualifying range. If your credit score expires before closing and your lender needs to repull credit, then you would be in trouble if this has happened to you.
6) Failure To Communicate Alimony or Child Support To Your Lender | This information is important and will affect the amount for which you qualify. If it comes up too late in the process, there’s a chance you could lose the house, so please share this information with your lender, even if he or she doesn’t ask.
7) Failure To Communicating You Are in the Market for a Condo | If you are purchasing a condo, the lender must factor in condo association dues, which can be very pricey. If your lender isn’t factoring a cushion for this into your pre-approval, you may find out that your debt-to-income ratios are too high once you are already under contract.
8) Getting a 10 Minute Pre-approval | Yes, I know you’re busy, but getting a pre-approval shouldn’t be a 10 minute process. Obtaining a mortgage loan is very complicated and your lender should spend time interviewing you, learning about your employment history, and reviewing the standard documents required for a mortgage pre-approval. Just because you are supposed to receive court-ordered child support doesn’t automatically make that money qualifying income. A lender must be able to show a history of receiving these payments on time. If not, the underwriter will not allow us to use the income.
9) Failure To Communicate an Employment Gap | A lender should ask for your two-year work history upfront, and, if a large employment gap arises that your lender was unaware of, you could have issues if you don’t have a good letter of explanation.
10) Failure to Submit Lender-Required Documentation| Your lender may ask you for documentation several times throughout the process–in order to make sure he or she can submit your story to underwriting in a timely matter and close you on time, you must be available via phone and email to respond to these requests in a timely manner. If you aren’t, your loan won’t make it to final approval, and you will not be able to close on your home.
How Do You Make Sure This Doesn’t Happen To You?
How can you be sure you won’t sabotage your own chances of closing on your dream home? Make sure you speak with a mortgage advisor who is knowledgeable, skilled, and thorough enough to make sure you’re not scaring underwriters away with your credit history, bank statements, and employment history. A skilled loan officer will not conduct a 10 minute pre-approval or send you out to search for home without explaining closing costs and how to get to the closing table with ease.
At First Home Mortgage, we give all of our borrower this Avoiding Mortgage Sabotage handout early in the game so that there are no surprises during the processing and underwriting of their loan. Feel free to contact me with any questions on how to make it from the first date to the chapel with your next home. Also, if you are already under contract and your mortgage financing is falling through, check out this post: What To Do If Your Mortgage Financing Is About To Fall Through.