That's some nice truck isn't it? Kinda caught your eye didn't it? I mean who can just walk by a bright red truck? Ooooh, and did you see the special financing package that Ford is offering on it? SWEET!
I hope I haven't confused you. This is a mortgage blog not a truck blog, but I wanted to discuss when it is appropriate to buy that new truck and when it isn't. A truck or a vehicle is a large purchase and if you are considering purchasing a home in the near future, you probably want to consider delaying the vehicle purchase until after your home loan closes. There are a couple of reasons for that.
On the one hand, when you go to the dealership to look at cars or trucks or motorcycles the dealer will shove a bunch of papers at you to sign, ask you some questions and all of a sudden they are suggesting you take a test spin in that Miata that had lured you in. One of the papers you have just signed is an authorization for the dealership to pull your credit. Sometimes they ask, or mention it. That isn't a big deal if you aren't planning to obtain a mortgage anytime soon, but if you are-when they pull credit for vehicles and you go to two or three different places you could have upwards of 10-20 credit pulls on your report. That will hurt your scores.
The second issue that comes into play is once you buy that new car you may be using money for car payments that could go to house payment-in fact you may have sucked your ability to buy a house up into your vehicle payment. I have seen some truck payments at $600 or more. My house payment is less than that. My motto is, if it's on wheels and the payment is that high, it better have two bedrooms and a full bath, because otherwise it ain't worth that much. Unless of course, it's a Winnebago.
In any event, I have seen situations in which the potential buyer was paying so much for their truck or car that they couldn't qualify for a house. So if a house is in your near future you might forgo the status wheels until you have seen what you can and cannot afford.
Once in a very great while someone will want to purchase a vehicle before their loan closes. If they do that without alerting their loan originator they may run the risk of increasing their debt ratio to the point that they no longer qualify for the mortgage and then can't close on their home. Normally replacing one car payment for a similar one will work out-except that in closing the old car loan account and adding a new one there is often a drop in credit score. So the best course of action is don't buy a new car until you have safely closed on your new home.
A majority of mortgage loans have down payment requirements. What this means is that the borrower is required to have the down payment amount be it 3.5%, 5% or 10% invested in the transaction. The underwriter is going to want to see this amount of money in the borrower's bank account prior to closing. Just saying you have the money isn't enough. It is definitely a Jerry MaGuire "show me the money" moment.
The above picture would be me when I find out that one of my borrowers has spent their down payment money on a vacation, or who knows what. It happens, folks, though you would think it is plain old common sense. People sometimes unwittingly spend their down payments.
Opening new credit card accounts or obtaining new bank loans can have the same effect as purchasing a new car. If the debt ratios are tight, charging up that new living room furniture can throw the ratios over the top and the loan can and will be denied. It is okay to go shopping for these items, you just can buy them until the new mortgage loan is closed. Many people think the lender won't find out. I have often said that by the time you are done with a mortgage loan we will know everything about you including your underwear size. I'm not kidding. Lenders often pull credit again prior to closing to be sure no shifts in scoring or debt ratios have been exceeded due to new credit.
The last topic I want to address today is your job. I hesitate to tell anyone to turn down a good possibility to better your financial position. But sometimes depending on what the change is, it can cause your loan to be denied. If you are moving to a different position that pays more or even laterally within the same company-there shouldn't be an issue - unless - you move from a salaried or hourly position to a commission based position. In lending if you are using commission as income there must be a two year history of the commission prior to it being considered stable income. So if you moved from an administrative job to sales and the sales job has commission attached to it you will not be able to count the commission as income. The same applies to professions that may be seasonal in nature. If you move from to a construction job, concrete work for example-there will need to be a two year history as there is a portion of the winter in Indiana in which you won't be able to work.
If you are moving to a position with a different company doing the same type of work you probably will not have a problem unless you have a probationary period to fulfill prior to permanent employment. If there is a probationary period the loan will not close until it is completed.
Change in job alone is not necessarily the kiss of death to a mortgage loan, but you need to check with your Tippecanoe Mortgage loan originator to be sure of what the consequences might be if you should switch jobs in the middle of a mortgage loan. Be assured that the lender will find out-probably the day or two prior to closing. All lenders do a final verbal verification of employment just prior to closing. Why? Because they want to be sure you are still working, you silly goose. And if there is a job switch that is undisclosed-verifications will have to be redone. If commission, bonus income, or a probationary period turns up you may be declined.
I have had enough folks commit the aforementioned actions to know they often result in the denial of a mortgage. I have realized that many people have no idea of how decisions that are made in the daily course of living have to be amended when in the mortgage financing process. The hard and fast rule is once you have decided that obtaining mortgage financing is in your future, do not make ANY financial decisions that affect income, monthly indebtedness, or assets prior to consulting with your loan originator to be fully aware of the impact of these decisions on your ability to obtain financing.
Having to tell someone that they made a decision that results in their home not closing is a call I prefer not to have to make. Paying attention to a few simple rules will ensure that this doesn't happen to you.
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