This is a wonderful time of year!! The holidays are right around the corner and we’re all feeling festive and looking forward to picking out and buying just the right gifts for our loved ones. But before you shop till you drop, remember your long term goals of saving for a new home in 2019!! Spending and sometimes mindless over-spending can put a big dent in your finances, setting back your plans for saving for that down payment.
If you’ve already been pre-approved for a mortgage, congratulations!! But don’t think that this is the end of the qualification process, it’s really just the beginning. Be aware that what you do and spend between mortgage pre-approval and the actual closing of your home purchase can adversely impact the chances of your loan actually going through.
First of all, it’s important to recognize that just because you’ve been pre-approved for a loan of a certain amount, it doesn’t mean you should plan to utilize that full amount towards the sales price of the home. Buying a home is about so much more than the selling price — closing costs, taxes, home insurance, private mortgage insurance, moving costs, maintenance costs, painting, decorating, new furniture and maybe appliances too … these expenses all need to be planned for, on top of your mortgage.
So now what? You’ve got that pre-approval and you recognize your home buying budget limitations and fully intend to stay within that budget but you’re feeling flush, knowing that you won’t be purchasing up to the maximum for which you’ve been pre-qualified. That’s not an excuse to run out and buy all new furniture and appliances for your new place as tempting as that might be!! Hold off on the 65” TV as if your debt-to-income ratio becomes skewed, your lender may become concerned about your ability to repay the home loan and pull the rug on the paperwork. Also refrain from signing up for a new credit card during the time between your mortgage preapproval and the closing of your home purchase. Not only can applying for a new credit card lower your credit score, if you do get the card and start using it, your debt load will rise and again, could affect your debt-to-income ratio.
If you have any family members feeling generous this holiday season who decide to present you with a cash gift toward your new home, make sure you disclose those large bank deposits to your mortgage loan representative first. Likewise, discuss any large withdrawals that could significantly decrease the amount of cash reserves your pre-approval was based on.
And one thing you may not be able to control, but still need to be aware of, is that you ideally shouldn’t switch jobs just before closing on your new property. Recently, we had a house scheduled to close in Plainsboro on a previously negotiated date and the owner moved out, had the house cleaned and made plans to close on that date. Lo and behold, one of the buyers had just begun a new job, at a greatly increased salary. The lender, as is standard practice, called the employer that was listed on the application to verify employment and was told that the borrower no longer worked there!! This reopened the file, the new employment had to be verified and the closing was delayed by a week. It all turned out well, but the seller had to pay the costs associated with owning the house for an additional week and the buyers spent an additional week in a hotel at great expense and inconvenience.
So remember, continue to save more money than you spend as your closing date comes closer. Pay your bills on time to reinforce your financial stability, and never give creditors a reason to have to report you to the credit bureaus.
In the meantime, set a holiday spending budget and stick to it. After all, your best present will be opening the door to your new home in the new year!!
