What Affects Your Home Loan Application Before Closing Day?
June 2, 2024
Once your home loan application is approved, it’s tempting to think you are “bulletproof” on the way to closing day, and nothing can stop your FHA loan now.
But there are some factors to be mindful of before closing day. Never assume the deal is done until the keys are in your hand. Why do we say this? We examine some of the key reasons below.
Bad Weather, Accidents, and Related Problems
The house you want to buy with an FHA loan may be fine when you haggle with the seller or at appraisal time.
But what happens if a major disaster, fire, or even an accident damages the home you want to buy? In such cases, it will be up to you and the lender to determine whether the loan should be moved forward.
In some circumstances, the lender may be unable to continue with the loan if the damage is too extensive.
Low Appraisal
An FHA appraisal that comes in lower than the asking price forces the borrower to either walk away from the loan, haggle with the seller to try lowering the price, or the borrower can agree to pay the original price despite the low appraisal.
If you choose the latter, you cannot finance the difference between the appraised value and the sale price. You have to pay that in cash.
If you choose to walk away from an FHA mortgage loan that appraises lower than the sale price, you will not forfeit your earnest money.
Changes in Credit or Employment Before Closing Day
If you get a lower credit score, miss payments, or apply for new credit between loan approval and closing day, you risk having your lender re-evaluate your credit for the mortgage.
Any change in your debt ratio, payments, FICO scores, or other financials in the negative can jeopardize your home loan, even if your loan has already been approved.
The same may be true if you make radical job changes along the way before closing day. Don’t quit your job, change careers, go freelance, or start a small business until AFTER closing day.
In short, if you aren’t beyond your closing date, avoid negative financial and employment changes at all costs.
You should know that lenders typically run your credit with the option to run it again later on before closing day. This is a standard practice, and your lender has the right to do so.
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RELATED VIDEOS:
Don't Skip the Home Inspection
Bigger is Better With a Jumbo Loan
Insuring Mortgages With the FHA Funding Fee
But there are some factors to be mindful of before closing day. Never assume the deal is done until the keys are in your hand. Why do we say this? We examine some of the key reasons below.
Bad Weather, Accidents, and Related Problems
The house you want to buy with an FHA loan may be fine when you haggle with the seller or at appraisal time.
But what happens if a major disaster, fire, or even an accident damages the home you want to buy? In such cases, it will be up to you and the lender to determine whether the loan should be moved forward.
In some circumstances, the lender may be unable to continue with the loan if the damage is too extensive.
Low Appraisal
An FHA appraisal that comes in lower than the asking price forces the borrower to either walk away from the loan, haggle with the seller to try lowering the price, or the borrower can agree to pay the original price despite the low appraisal.
If you choose the latter, you cannot finance the difference between the appraised value and the sale price. You have to pay that in cash.
If you choose to walk away from an FHA mortgage loan that appraises lower than the sale price, you will not forfeit your earnest money.
Changes in Credit or Employment Before Closing Day
If you get a lower credit score, miss payments, or apply for new credit between loan approval and closing day, you risk having your lender re-evaluate your credit for the mortgage.
Any change in your debt ratio, payments, FICO scores, or other financials in the negative can jeopardize your home loan, even if your loan has already been approved.
The same may be true if you make radical job changes along the way before closing day. Don’t quit your job, change careers, go freelance, or start a small business until AFTER closing day.
In short, if you aren’t beyond your closing date, avoid negative financial and employment changes at all costs.
You should know that lenders typically run your credit with the option to run it again later on before closing day. This is a standard practice, and your lender has the right to do so.
------------------------------
RELATED VIDEOS:
Don't Skip the Home Inspection
Bigger is Better With a Jumbo Loan
Insuring Mortgages With the FHA Funding Fee
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