August 5th, 2011
In her article “4 Insider Secrets for Avoiding Surprises at the Closing Table,” Tara-Nicholle Nelson offers several ways to minimize the chance you’ll receive any curve balls before closing on your new home. We’ve discussed some of these tips before, but they’re certainly worth re-mentioning.
Keep your finances exactly the way the lender found them. Most buyers know not to go out and buy a new car before closing. But, as Nelson says, you’d be surprised at how many people rack up their credit or open new cards to purchase new appliances, furniture or supplies as soon as they think the house is theirs. As tempting as it is, it’s critical for you to suppress the urge to do any big spending before the house is yours in writing. It’s a guarantee that lenders will take one final look at your credit report before making the deal official.
If your escrow runs 45, 60 or 90 days (or longer) as they commonly do in short sales and sales of bank owned homes, new accounts can certainly show up on your credit report in that time frame, endangering the deal and generating a surprise “no deal” from your lender just when you thought you’d be getting a set of closing docs to sign.
You also want to avoid making any big deposits. Lenders often ask for recent bank statements before closing to make sure you have the cash, and to ensure that you haven’t been borrowing in order to afford borrowing. In other words, they don’t want to even suspect that you borrowed money from family and friends in order to close the deal. So, if you make any deposits besides your paycheck, be ready to explain and prove where it came from.
Be honest. There’s no point in telling your lender any fibs in order to get approved for a mortgage. Funders and loan underwriters will check, re-check, and check again to ensure that every bit of information is verified and up-to-date. For example, if you’re in the process of getting divorced, don’t claim that your marital status is divorced.
Watch the calendar. Nelson sums it up when she explains,
Mortgage interest rates can change dramatically over a period of a few months, and closing costs vary widely based on things as seemingly minor as whether your transaction closes at the beginning or the end of the month.
Closing dates can change very easily, so make sure you keep in close contact with your mortgage and real estate brokers so you don’t find out last minute that the date changed, and it will cost you more money.
Obtain and read your closing documents before hand. We don’t need to tell you that buying a home is a very big financial decision. When you have hundreds of pages in front of you and you’re anxious to finally own the home, chances are you won’t scrutinize the conditions of your mortgage, which could be a very big mistake.
Ask the lender for your loan and title documents in advance so that you’ll have time to review them. Then if you have any questions or any corrections need to be made, the lender will have the time to work with you without pushing the closing date even further.