You got the pre-approval, found a home, and had your offer accepted. Congratulations! All you need to do now is sit back and wait for closing, right? Well, not exactly. As Lenny Kravitz once crooned, “It ain’t over till it’s over”.
Sure, the odds are reasonably good that nothing major will go wrong. But that doesn’t mean things can’t go wrong. A financial misstep now could change your mortgage terms and interest rate, or even get you denied altogether—even if you’ve got a closing date on the books. To make sure that doesn’t happen to you, avoid these less-than-savvy money moves.
1. Moving money around
If you’ve been storing up cash reserves, do not—we repeat—do not move that money out of savings and into stocks while you wait to close.
Why would someone do this? Well, maybe you’d like to make some extra cash off those reserves—besides, the money is just sitting there anyway, right?
Wrong. It’s serving a real purpose: showing your liquidity. Moving money around can wreak havoc on your loan approval.
“You’d think that isn’t a big deal, but we’re counting how much money you have going into closing,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.”
“With savings, we count that as 100%, but with stocks we only use 70% of the value because stock prices can change,” he says. “So, if you have $100,000 in savings and you move that into stocks, suddenly you only have $70,000 from an underwriter’s perspective.”
You’ll need enough cash to cover the down payment, closing costs, and at least three months of mortgage payments. (Yep, that’s right, we said three months.) If the stock deduction dips your assets too low, you could be looking at a denial.
2. Taking a leave of absence from work
Lenders are relying on your being willing and able to work after they approve your loan—after all, it’s the only way to prove you’ll make those monthly payments.
We know stuff happens, and sometimes you have to take a leave of absence. But don’t risk it unless it’s completely necessary—or unless you’re prepared for your mortgage to get delayed or denied.
“Once, two weeks before closing, the borrower went out on medical leave because her back hurt,” Fleming says. “We had to wait for two more paychecks to prove she was back at work.”