Congratulations! You have approval for a home mortgage and are on your way to buying your first home. To make sure your mortgage closes on time, follow these simple guidelines to ensure you are on your way to becoming a homeowner. A misstep can postpone your mortgage closing or even eliminate your chances of purchasing your own home.
1. Document Your Deposits
You may think that having a large bank account balance helps your chance of securing a mortgage, but if the balance is caused by odd or irregular deposits, this can delay your loan closing.
The reasoning for this is simple: lenders want to make sure you aren't borrowing money from other sources to help fund your home. Fortunately, adequate documentation erases doubt about large deposits.
If the funds are from a side job, ask for a receipt to prove you worked for the money.
For deposits that are a result of selling your possessions, save the bill of sale for the sold item.
2. Stay at Your Job (or at Least a Job with a Similar Income Structure)
Historically, switching jobs during the application was cause for the loan to be delayed or even postponed indefinitely. Now, changing jobs is more permissible, but it is still ideal to stick with a couple recommendations.
If you are switching to a new hourly position, make sure you have documentation that proves your new hourly wage and the number of hours you are expected to work. An offer letter should suffice.
Be cautious of switching to a job with a commission based salary if you are currently an hourly or salary employee. Lenders may not be willing to consider commissions or bonuses if you have not historically received them.
3. Do Not Take on Any New Debt
It can be tempting to start furnishing your brand new home, or to buy a new car to park in your fresh garage. However, taking on new debt during the mortgage process is not advised. By taking out another loan or even charging a large purchase to your existing credit card, you can increase your debt to income ratio. If your debt to income ratio is too high, your loan may be denied or the terms might not be as favorable.
It is best to keep your debt to income ratio at 43 percent or less. This means that your total debt payments (your mortgage, student loans, auto loan, credit card payments, and personal loans) should not exceed 43 percent of your gross monthly income.
Your goal to own a home is within your sights. Keep the goal on track by adhering to these suggestions to help your mortgage close as scheduled.
For more information, talk to a local loan officer.