Some Advice on How to Keep Your Settlement Sweet

If you’ve been keeping up with the news, you’re aware that our historically low interest rates continue to remain at the lowest on record dating back to 1971. With mortgage rates like this, it’s a great time to get into the market whether you are a first-time homebuyer or want to sell and buy into another home.

The only thing you have to fear is yourself. You may be like my friend Elsa. Elsa drives around with a bumper sticker that says, “Oh, no!  Not another learning experience!” And Elsa has plenty of learning experiences because she doesn’t plan ahead, saying that she prefers to “dread one day at a time.” This attitude can really come back to bite you when you’re waiting to close on a mortgage loan.

Once you’ve locked into that sweetheart mortgage rate, it’s important to safeguard it. We’ve all heard stories about people who’ve gone to settlement and found that the lender had gotten cold feet at the last minute. Worst case scenario, you could be left homeless and minus the inspection fees and your earnest money deposit. To safeguard against this sort of disaster, you need an experienced real estate agent on your team who knows the lending process and can anticipate potential problems and correct them long before you go to settlement. 

Your real estate expert will be there for you to ensure that your mortgage closings are quick and trouble-free. A local real estate agent expert, Ashley Leigh, Broker / Owner of Linton Hall Realtors, provides his insights on the mortgage closing process. 

Ashley explains that there are several precautions that every homebuyer should take to ensure that their mortgage will go to settlement without any hitches, “Once the contract you’ve submitted on a house has been ratified, and the loan application is pre-approved, you have to be very careful with your finances. The lenders have closely examined your record, so don’t do anything that will make them reopen the investigation of your financial status. You should always check with your real estate agent if you need clarification on what sorts of behavior the lender is likely to see as risky.”

Ashley points out the following red flags that lenders will be looking for prior to closing of the loan. He provides the following recommendations to keep your loan on the right track towards the closing date:

• Don’t move cash from one bank to another if you can help it. Your lender must verify all assets listed as part of your application. Moving these assets around can create a paper trail nightmare. The best advice is to leave everything where it is. If you have to make changes, consult with your real estate agent first.
   
• Document large deposits. All sources of funds for the transaction will need to be verified. The lender will be looking at any large deposits into your asset accounts (checking, savings, money market, etc.). You should be prepared to document all sources — perhaps a copy of a paycheck, bonus check, money from the sale of an asset, etc.
   
• Avoid buying big-ticket items and increasing credit card debt. Your credit will be run again prior to closing. Any new debt or increase in your monthly payment on your credit card debt could affect your loan. Don’t spend a lot of money buying new furniture or redecorating your new home until after closing.
   
• If you’re selling a large asset to raise the money you need for closing, you need to document the sale. Keep copies of everything, including the check the buyer gives you, car title or a bill of sale. Sometimes you’ll even need to get a certified appraisal of the item.
   
• Document gifts appropriately. Large cash gifts from relatives are very common when purchasing a home. If you’re anticipating receiving a cash gift from a relative toward the purchase of your home, be sure to notify your real estate agent. 
   
• Keep a paper trail. Store all of your bank statements, pay stubs, tax returns, along with any W-2s, 1099s or K-1s and any other financial papers from the past two years in a handy place. If you sold a home in the past two years, have your (HUD-1) Settlement Sheet handy. Try to create a file where you can consolidate all of your financial paperwork for easy access.
   
• Avoid new lines of credit. It’s a good idea to avoid any new sources of credit as it will materially change your credit report. Additionally, if you’re planning to pay off major credit debt before closing, hold off until you’ve spoken to your real estate agent.
   
• Tell your real estate agent about any changes in your career. If you get a new job, make sure you let your real estate agent know about it as soon as possible so that they can ensure all appropriate changes are made to the loan application.

If you don’t want to remember a long list of ‘gotchas’ Ashley recommends, “Find a real estate agent who has a proven track record of success in closing deals and consult with that real estate agent before you do anything that could change your financial status. Working together as a team with your real agent and loan officer will ensure you receive a favorable interest rate and a smoother settlement process.”