We provide extensive advice here on our website that helps our clients successfully buy and finance their home. From tips on various loan programs to how credit works to properly documenting a file and more, we turn our expertise into a knowledge base for you to tap into whenever you want. But there are some other things that you need to look out for that don’t help identify the right loan program or explain certain mortgage terms. Here are three things that can get your loan application turned down, even though you have perfect credit, income and a down payment.
1: You Made a Switch
When you submit a loan application or even if you have a casual conversation with a loan officer over the phone, the advice you receive is based upon your situation as it is today. Your loan officer will ask about your job such as how long you’ve been doing what you do, how long you’ve been with your current employer and how much money you make each month. After all this, you get your application preapproved. But then you make an offer on a home, it’s accepted and your closing is 30 days away. So far, so good. Yet someone who suddenly changes employers while the loan application is being approved will cause a delay. One of the very last things a lender does prior to issuing funds for a mortgage is to call the employer to make sure you’re still there. If not and you switched jobs, your loan won’t close on time.
2: Go On a Shopping Spree
Sometimes, and especially so for first time buyers, once a mortgage application is approved, they go on a shopping spree. When buyers close on a home one of the first things they may do is head to the furniture or appliance store and start buying things to furnish the new house. This is one of the reasons lenders make sure there are extra funds left over when the mortgage is funded. There needs to be some cash on hand. But if someone buys a new washer and drying and some new furnishings and puts it on a credit card, when lenders pull a final credit report they’ll see a new balance and new minimum monthly payments. Just like switching jobs, new information like this means the lender has to underwrite the loan all over again. Taking too much time and blowing past your closing date can mean not just losing your earnest money deposit but losing the home altogether.
3: And Speaking of Shopping
One piece of advice you’ll hear over and over refers back to Topic #1, don’t switch. Here, however, it means don’t do anything differently than you already do now. Don’t go buy another car and have new monthly payments. Even if you applied for an automobile loan and you later changed your mind, the credit inquiry will appear on your credit report and clearly show that you applied for an auto loan but the monthly payments and loan balance have yet to be reported to the credit agencies. Just this single credit inquiry alone can derail a transaction.