Everyone loves a good sale, but make sure your buyers don’t go crazy with holiday shopping — because it could jeopardize their ability to close on a home purchase. After buyers have received a preapproval on their home loan, they must be cautious with their finances. If they go overboard with their shopping in the meantime, they could even kill the loan approval entirely.
Here’s what to make sure your clients know:
Don’t apply for new credit or accumulate new debt. It’s tempting to apply for a new store credit card offering added discounts on top of sale prices, but just filling out an application could be risky for your clients’ credit profile. Opening a line of credit requires a credit inquiry, which could not only stall their mortgage loan application but also impact their debt-to-income ratio. It could make a lender believe they’re a greater risk than they originally appeared. Home buyers need to avoid any major purchases, such as furniture or a car, before the home buying process is complete, says Tammi Robson, a mortgage broker at Metro Lenders in Denver.
Don’t transfer large amounts of money. Home buyers need to keep their money in one place as they await closing. Shuffling money between accounts can send red flags to lenders and make them concerned about undocumented funds or money troubles they may not have spotted beforehand.
Watch the gift money. If families are offering cash for holiday presents, buyers need to be aware that this may put their mortgage applications at risk. Lenders will be scrutinizing their accounts and looking for unusual deposits, such as those that are 50 percent or more of their monthly income. They are also looking for any unusual withdrawals. Buyers may need to be prepared to explain any large deposits or withdrawals.
Source: “Preapproved? Don’t Let Holiday Shopping Kill Your Home Purchase,” Forbes/Trulia (Nov. 24, 2015)