If you've found the perfect home and your mortgage is all lined up, then all you have to do is wait for closing before you can move in. Make sure to keep everything flowing smoothly by avoiding some of these common pitfalls that can compromise a successful closing.
1. Avoid Major Purchases
Your loan is not fully approved until you sign on the final dotted line and have the keys in hand. Don't rush out and take on more debt before the final closing. It can be tempting to start ordering new furniture or financing future renovations on the home, but these activities can affect your debt to income ratio. If your debt level becomes too high, then your mortgage may not be approved. Wait until after closing before taking on any new debt.
2. Don't Move Your Cash
If you will need to move cash around to finalize the loan, it's best to do so before you begin your home search. Moving cash around during the early stages of the mortgage underwriting process can cause money to be missed, or it may look like you have more cash on hand than you do. One of the early stages of the mortgage process is asset verification, where the amounts in all accounts are verified. If you must move cash after underwriting begins in order to assemble your down payment, wait until the verification process is complete.
3. Disclose Any Gifts
It's usually okay to receive a gift from a family member to help with the down payment of your home, but it must be disclosed and it must follow certain conventions. Every lender will have different requirements, which can dictate the amount of the gift. In most cases, the money must truly be a gift, and it can not be a loan. The person giving the gift may need to provide the lender with statement verifying this.
4. Document Asset Exchanges
If you will be transferring or selling assets in order to raise funds for closing, make sure that these are fully documented. Asset exchanges include things like selling a boat or car. Keep all paperwork from the sale, such as the change of title or deed, so you can prove where the money came from.
5. Keep Paperwork Handy
If you begin packing for your move before closing, don't make the mistake of packing away any financial documents. You may be required to show the lender copies of your old tax returns or bank documents, so it is best to make sure that these are close to hand up until closing.
Contact a local loan service for more information about mortgage loans and loan programs.