June 20, 2018
If you’ve found the home you want to buy with an FHA mortgage and it looks like you are going to definitely close the deal, don’t be fooled; there are still mistakes to avoid before you sign the papers and accept the keys.
One important blunder that should be avoided at all costs? Changing your financial status before loan closing-as in applying for new lines of credit, missing payments, or other issues that can have your loan officer thinking twice about approving the loan and allowing it to close.
If your debt-to-income ratio isn’t ideal to start with, the addition of new credit will definitely affect your potential to close. FHA loan rules, lender standards, and other requirements all may factor into the decision on how to handles such contingencies.
Bottom line, it’s not safe to assume you can apply for a new credit card or open other types of credit accounts even if you feel certain your closing date is set in stone.
Another mistake to avoid is altering the source of your down payment funds. The FHA loan handbook, HUD 4000.1, instructs the lender that down payments may only come from approved sources and your lender is required to verify all sources of down payment funds.
This is true even after loan approval-if your down payment source changes the lender is required to review the new source, make sure it’s not from a payday loan, a gift that does not meet FHA and lender standards for gift funds (including a requirement for NO expectations of repayment), and is not sourced from a party that is not permitted to contribute.
If you MUST change the source of your down payment funds, you should take great care to document it meticulously.
Do not deposit any more or less than the actual amount of the gift funds for the down payment if you are receiving such funds, make sure the deposit is in the form of a check, and make sure to ask your gift giver to write a letter explaining that the funds are a genuine gift and that there is no loan involved.
If you decide to change the way your down payment funds are paid, you will need to expect a delay depending on circumstances as the lender will have to take the extra time to verify the change.
For example, were you planning on paying cash for your down payment out of a savings account but changed your mind and cashed in some investments?
The lender will need time to verify that this actually happened, that the money you are paying is from an approved source, and that there is proper documentation to back up your source.
Ask your loan officer how these issues can and will affect your loan if they apply to you or if you suspect that they will apply to you.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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