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February 20th, 2018 11:02 AM

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A mortgage lender may run a second credit report just prior to closing, so any adverse actions by the buyer(s) during this time can disqualify the loan approval.  A mortgage loan is conditionally approved, with the lender reserving the right to re-verify credit, income, assets and employment at any time.  The lender may then cancel the loan if there are any major changes to the qualification status.

A debt-to-income ratio is the gross monthly income divided by the amount spent on debt.  Debt items include mortgage payments (including principal, interest, insurance and taxes), car payments, credit card payments, child support payments, etc.

The lender considers debt-to-income ratio when approving a mortgage loan.  Only 28 % of income can be used for the mortgage payment, which includes taxes and insurance; and 36% for the mortgage payment the remainder of debt.  Anything that negatively affects the debt-to-income ratio may change an “approval” to a “disqualification.”

A red flag is any inquiry made regarding credit worthiness.  Do not purchase a big ticket item such as a car, boat, motor home or furniture prior to closing.  There is a risk of a red flag showing up on the credit report.

The balances of liquid assets are considered when approving a mortgage loan.  These liquid assets may include checking accounts, savings accounts, certificates of deposit, money market accounts, retirement accounts and stocks and bonds.  Avoid changes to the balances of these accounts and do not close any of them.  Do not change banks or make any large withdrawals or deposits prior to closing or the bank can ask for a paper trail tracking all transactions. 

Needless to say, changing a job prior to closing on a home is a HUGE red flag and unless it is a transfer within the same company with comparable or increased income, it could definitely hinder or cancel a closing. 

A typical closing with a mortgage loan takes an average of 40 to 50 days to complete.  So, during this critical time, be sure to maintain all the initial information given to the lender so that there are no hurdles to overcome.

Written by Barbara Doeringer

Posted in:Real Estate
Posted by Allen Doeringer on February 20th, 2018 11:02 AMPost a Comment

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