What NOT to Do After You Apply

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If you want to delay or cancel your closing - do one of the following after you apply and prior to closing!

Lenders have gotten stricter in response to the mortgage meltdown of 2008 - 2009. 
 
The latest move is a clarification by Fannie Mae about what changes can occur prior to closing - effective for applications after June 1, 2010.  The rules are not new, however the vigorous enforcement is.

1) New Credit Cards or Loans - If you obtain new credit prior to closing, this will require you to update your application and you possibly will not be approved if your Debt to Income Ratio is too high after you receive the new loan. 
 
Normally no more than 43% of your income should go to pay your debt payments, including your home payment.  This new loan may put you over the top. 
 
Your lender will pull a new credit report right before closing, and you may have some explaining to do, that could delay your loan closing.

 

2) Charge Up Credit Cards - Of course you are excited about your new home and you want to buy furnishings!  However - if your credit balances go up, your payments go up, and you may not be approved for the home loan if your debt ratio is too high.
 
How will the mortgage lender know?  They will pull a new credit report.  Any new credit, or any increase in credit balances will need to be documented, explained, and your loan re-approved.

 

3) Change Jobs - You've given your lender your paystubs and W-2's, and everything is done, right?
 
Not so fast.  The lender will verify your employment the day before closing, and sometimes the day off.  They will have a conversation about your chances of continued employment.  If you have put in your notice, or your job is not stable, the lender will find out. 
 
If you are starting a new job, you will have to be on that new job for 30 days and have received income from that job to qualify. 
 
4) File New Tax Returns - These days your mortgage lender will not only ask for a copy of your tax return in most cases, they will confirm with the IRS that your return is accurate and up to date.
 
They will also look for amended returns.  A common tax fraud scheme is for borrowers to file one return, then an amended return after the loan is approved.  Multiple returns are a red flag.. 
 
Bottom Line - change as few items as you can after you apply, and before you close your home loan!