Friday, January 4, 2013

Watch out for approval "landmines"!

For all the talk of how tough it is to be "mortgage approved", the basics of mortgages haven't changed. Mortgage approvals are still the 3-legged stool of income, equity, and credit.
Sometimes, though, it's not getting approved that's hard -- it's staying approved.
You have to watch out for landmines.

During the process, things can go wrong

Because mortgage approvals (the approval to loan closing time frame) take time, there is plenty of time for "things" to happen to you and unqualify you or unapprove your approval.  :(   In a typical home loan market, it's about 3 weeks from start-to-finish.
Approvals can take longer, however, depending on market conditions. For example, if rates are low and there's a refi boom on-going, a refinance can take 4 weeks to close.

Some things you just don't have any control over: For example, if lose your job, become ill, or see your home damaged by storms (refinance), you may lose your mortgage approval -- even if you were previously cleared-to-close.
Unfortunately, these are all events that are beyond your control. You can't control sickness any more than you can control Mother Nature. But you can control yourself during those extra few weeks.

Making sure that you don't do something that you do have control over to cause your loan to be "unapproved" is what I wanted to mention here.  Good behavior matters in mortgage.

Bad Decisions during the Mortgage Application Process

Keeping "good behavior" in mind, here are 8 things you should absolutely not do between your date of application and your date of funding. I have seen each of these things derail a closing:
  1. Don't buy a new car or trade-up to a bigger lease or car payment
  2. Don't quit your job, changing industries or start a new company
  3. Don't switch from a salaried job to a heavily-commissioned or large bonus in place of salary, job
  4. Don't transfer large sums of money between bank accounts
  5. Don't forget to pay your bills -- even the ones in dispute
  6. Don't open new credit cards -- even if you're getting 20% off
  7. Don't accept a cash gift without filing the proper "gift" paperwork
  8. Don't make random, undocumented deposits into your bank account
There are a plenty of other items to beware of during the mortgage loan application to closing process, but this is a good "first list" to pay particular attention to.