Soft landing closings...
Many Austin home buyers do not realize that approval for a loan does not guarantee they will get the loan. Buyer behavior after getting the approval can cause the loan to be disapproved by the lender. This can often happen right before closing and ruin everyone’s day.
Remember, your loan approval is based on your current financial and credit status as of the date of the loan approval.
Your lender will likley check your credit again before closing, and if the lender sees that your financial condition or credit rating has changed, they can refuse to grant you the loan.
Keep these tips in mind for ensuring your loan stays approved.
1. Do Not Apply For Credit For Any Purchases - This is critical. If you apply for credit to purchase any products, such as automobiles or home furnishings for your anticipated new home, your credit report will reflect that you have applied for credit. Having this extra credit can disqualify your loan. This also includes getting new cell phones and “no payment for xx months” type of deals. Try not to let your credit be pulled for any reason whatsoever.
2. Do Not Apply For Any Credit Cards - This includes department store or home improvement store charge cards. As far as the lender is concerned, you have just increased your monthly expenses. Even if you don’t charge anything to the card, you have that credit available, and that is what the lender does not want to see.
3. Do Not Make Large Purchases On Credit Cards - Large purchases decrease the amount of available credit you have, and will thus decrease your credit score. Wait until after closing to buy that big screen TV or new riding lawn mower.
4. Do Not Allow Credit Line Increases On Your Current Credit Cards - Increasing your credit lines can have a negative affect on your credit. If any credit card company offers to increase your credit line, tell them to hold off until after you have purchased your new home.
5. Do not close any existing credit card accounts - Credit card accounts that have a good history of payments are good for your credit score. Leave these accounts alone. By closing credit accounts, you are effectively decreasing your available credit, which will decrease your score.
6. Do Not Make Any Large Deposits or Withdrawals From Your Bank Accounts - Many lenders get very suspicious regarding funds being deposited or withdrawn from bank accounts that are not considered “ordinary” based on their research of your credit and banking history. But why would they worry about a large deposit? Good question. Suppose that deposit was from a loan made to you. You would now owe more money than when you applied for the home loan.
Here are some stories of clients who were buying homes and almost lost their loan approvals.
A recent client who was moving and had a garage sale. The client made over $1500 at the garage sale. He promptly deposited this money into his bank account. When the lender asked for updated bank statements prior to closing, this $1500 threw up red flags for the lender. The concern was that someone may have loaned my client cash to help buy the house. The client had to explain what happened and assure the lender that he had received no funds that had to be paid back.
The best advice we can give is that after being approved for a loan, simply don’t make any large purchases or apply for any new credit of any kind. Also, ensure that your bank statements do not reflect any unusual activity.
Keep the lenders comfortable until closing. After closing, you can do as you please.
Note that you should always check with your lender for the best advice and the commnets given here is strictly for keeping your loan approved. If you are looking to increase your credit score for a future home purchase, these guidelines do not apply.
