Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
Holiday and year end shopping season is upon us! It’s hard to go a few minutes without an email or ad about “Black Friday”, “Cyber Monday,” or “Is it too-late Tuesday.” Okay, maybe I made up ‘too-late Tuesday.’ There is no question that everyone likes a good deal, and it seems like the sales and timelines for getting deep discounts start earlier and extend later with each passing holiday season.
When it comes to balancing a mortgage closing and an opportune bargain, there are a few things to be wary of that may affect your mortgage approval. As most mortgage applicants know, a lender will pull a borrower’s credit report at the beginning of the loan process, and will rely on the outstanding debts, obligations and/or liabilities as reported in that initial credit report. The information provided therein is used for loan program qualification purposes, and the all-important debt to income calculations.
A Pre-Closing Credit Update
It is extremely important to know that prior to loan closing all lenders will re-verify and update your credit profile before the loan will be released. If new or additional debts and obligations are identified on this new credit report prior to closing the mortgage loan, the lender at its discretion may re-underwrite the application to assess whether loan program qualification requirements are still met. The Lender can always reserve their right to amend or rescind its loan approval based on the new credit report results.
While it is almost impossible not to incur any new or additional debts prior to closing the mortgage loan (e.g. car loan, new credit card, installment loan for home furnishings, etc.), it is in the applicant’s best interest to disclose any new expenses or charges to the lender as soon as they become known. A good mortgage originator will be able to best advise and guide should something significant be revealed to them in a timely manner.
Another big pre-closing no-no
While in the underwriting stage, lenders will also be analyzing all of the necessary funds that will be used for closing costs or for “reserves” prior to a loan closing. While it is normal to have fluctuating funds between accounts, it can certainly become burdensome in the pre-closing phase.
Before transferring any funds in accounts that have been disclosed to your lender, make sure that you will be able to easily and quickly identify those transfers when requested by your lender. If you cannot track these deposits, the money movement could appear suspicious, and could signal a red flag for undocumented funds or money troubles.
Along those lines, the holiday season is also a time when those relatives who didn’t have the time or patience to find the perfect gift for you, instead might consider giving the next best thing – cash. Lenders will be monitoring your accounts for any unusual deposits and potentially even any unusual cash withdrawals. These too will need to be thoroughly explained to maintain your approved status.
Other common things to avoid
Don’t apply for new credit of any kind
Don’t pay off collections or charge offs
Don’t close credit card accounts.
Don’t consolidate your credit card debt
Don’t do anything that will cause a red flag
Don’t join a credit watch program
Don’t dispute anything on your credit report
Don’t start significant home improvements on your home
Don’t act as a co-signer on any loans
Suggestions to help maintain approval
Stay current on all your existing accounts.
Continue to use your credit as normal.
Manage your credit so as not to charge over your account limits.
Continue to pay your bills on time.
Continue to pay your rent/mortgage until you close.
Inform your lender of any change in your income, credit or employment
Keep copies of all pay check stubs and bank statements until closing
While some of these items may not necessarily unravel a loan approval, the time and headache to document these things can delay a closing or cause unnecessary extension fees that could otherwise be prevented. In the end, there is no perfect science to universally identifying every potential pre-closing issue, but working with a competent and knowledgeable lender and loan representative will help prevent many of these common last minute mishaps.
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