Yes!
As many new home buyers may not be aware, it is very important to be careful with your finances when applying for a mortgage. This is especially true if you already have a pre-approval for the loan and are in contract for the purchase of your home. Mortgage lenders have a fairly substantial laundry list of Federally mandated requirements for home loan qualification. For obvious reasons, credit and debt to income ratio are two of the most important factors that are considered when a lender is qualifying consumers for home loans. However, there are many other variables to consider that may be just as important and they are far more common around the holidays. With the higher volume of shopping and gifting around the holidays, it is crucial to pay close attention to how you spend, deposit and transfer your funds.It's easy to fall for the allure of savings when you are offered additional discounts on top of sales prices by applying for a store credit care but you need to think twice about how much this "savings" could cost you. I've seen quite a few funny social media memes about this very subject over the last few years. "That moment when your buyer just opened a credit card to save 10% on a $50 purchase the week of closing, now they don't qualify." It's not as funny as it sounds when a home buyer has worked so hard to purchase their new home. The reality of the situation is this is not without merit. Even the slightest income, debt and credit changes can disqualify you from acquiring financing. Something as simple as applying for a credit card let along using it or another card you own can have severe consequences on your credit profile. Under no circumstances is it advisable to buy that brand new car or other related major purchases for a loved on during this process, especially if it means there will be payments made on the item.
Other variables to consider are transferring money between accounts and gift money you receive. Keep your funds in one place, transferring larges sums of money between accounts can be a major red flag for the lender. This could result in concerns about undocumented assets and financial troubles that the lender failed to recognize earlier in the loan process. If your friends and loved ones are accustomed to giving cash, checks, money orders, etc as gifts it is best be careful how and when you deposit these funds if at all. It might be better to hold onto the cash, cash the check at the bank on the check and cash the money order in the same manner. If these funds reach your bank account, it could have serious detrimental impacts on the home loan and may even disqualify you from the purchase. If you already have major assets in your accounts the risk might not be as great but if you are in the very common situation where you may only be able to come up with just enough cash to close with a minimum down payment, don't risk making those deposits. Think of it like a profit and loss statement that the lender is required to balance and show evidence thereof. If you make large undocumented deposits or the total undocumented deposit amounts for that statement period need to be removed from your "assets" the lender may not be able to furnish evidence that you have enough cash to close. This would undoubtedly prevent you from qualifying for the mortgage, even if it's days away from closing. Be prepared to furnish evidence and a paper trail for all large deposits and withdrawals along with letters of explanation that the lenders "hope"the underwriters will allow. Keep in mind when acquiring "acceptable gift funds" for closing, these funds can only be from a blood relative or relative by marriage. The gift will also require a gift letter and bank statement from the donor showing not only that they had the funds in the account but it must also show the withdrawal amount matching the amount you deposited. The funds your relative gives you must be documented as well so don't try dumping money into that person's account without a paper trail.
There are so many other factors to consider when obtaining financing on your new home so it's best to consult your mortgage lender and ask a ton of questions. Before you make any deposits, withdrawals or pretty much anything that will affect your credit or debt to income ratio, consult your loan officer for advice. Did I mention don't switch jobs during the loan process? Mortgage lending practices and requirements are changing all the time so be sure to talk to your lender about other concerns not covered here.
For more information, please click here to read the source artice: "Preapproved? Don't Let Holiday Shopping Kill Your Home Purchase" on Forbes.com
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