This topic comes up again and again in real estate and mortgage offices. Buyers get into trouble by changing jobs or buying new cars during the home buying process. Many times they no longer qualify for the mortgage they were originally approved for. This is a big problem if they have not closed on the property yet!
In order to be approved for a mortgage, the lender requires you provide certain information to the underwriter detailing your assets. These include savings and checking account bank statements, copies of IRS forms, proof of Certificates of Deposit, paycheck stubs if you have an employer or business records if you are self employed.
The bank or mortgage company needs this information to ascertain the source of your down payment. This also provides proof of your debt-to-income ratio so that the lender is assured that you will be able to make your monthly mortgage payments after you have met your other monthly financial obligations.
You need to prove to the lender that you are a financially stable individual and pay your bills consistently. This is not the time to make any major financial changes or large purchases such as new cars, appliances for your new home, furniture or jewelry. It is a bad time to make a major purchase even if you can comfortably do so and still make your mortgage payments. Any change in your finances during the loan process will cause the underwriter to take a closer look at your monetary situation, and depending on your debt to income ratio you may no longer qualify for the same loan amount.
Note that if you purchase a car that will cost you an extra $400 per month, this will result in your loan amount approval being reduced by approximately $50,000! The bottom line is that any and all large purchases should be delayed until you have closed and funded on your new home.
Another change which should be avoided during the loan process – if at all possible – is a change in employment. The only reason your lender will look upon this favorably is if you have changed jobs for a significant increase in income.For expert advice on mortgage financing we recommend Max Leaman with Prime Lending. He can be reached at 512-617-5636.