Closing on your home is undoubtedly a very exciting day, but it’s important to avoid certain financial moves that could jeopardize your VA loan.
While you might be looking forward to choosing paint colors and furniture, there are a few things to know before getting too excited.
From a VA lender’s point of view, it’s best to keep everything consistent throughout the closing and underwriting process. This helps ensure you have a predictable and stress-free closing process.
Focus on the following seven tips and other advice from your lender while you wait to sign those closing papers for your loan.
Employment is critical to every VA loan application. It’s imperative to ensure your income does not change during the closing process. Any changes to your employment, such as being terminated or laid off, could impact your ability to qualify for the VA loan. If your employment status changes, lenders and closing agents might want to take a second closer look at your new conditions.
What if you found a new job that pays more? Even in a situation like this, it’s best to wait until after the home closes before making the switch. Otherwise, the lender may pause the process or even decline to offer the loan.
If there’s a change to your marital status, it’s critical to update the lender immediately. That’s because your marital status impacts how you hold the title. The closing process assigns the ownership of the home to you and your spouse. If that changes, the lender needs to know so that ownership of the home is considered.
Changing marital status could also impact income and other VA loan requirements. For that reason, you don’t want to make drastic changes to your domestic situation. If you’re worried about your marital status, it may be best to wait to apply for a loan until you’ve resolved those matters.
It’s tempting to buy furniture for your new home that happens to be on sale this week. You might even be thinking about getting appliances. But it’s best to wait on these types of big-ticket items.
Big-ticket items are large purchases that require a significant financial investment. These could include buying a car, appliances, electronics, furniture or other sizeable purchases.
Large withdrawals from your accounts, including your bank accounts or credit cards, might significantly increase your debt or reduce your account balances. This could hurt your chances of qualifying for a loan.
Purchasing big-ticket items often require opening a new line of credit, which lenders could view as a red flag.
It’s not uncommon for lenders to double-check these numbers at the last minute to ensure they are still accurate. Wait to buy that new car or bedroom suite until after you’ve signed your closing documents.
Moving money around is a big deal when it comes to closing on a house. VA lenders and closing agents look at what you’re spending and what’s happening with your bank accounts. If you’re pulling thousands of dollars from your savings, they'll wonder why. They may also be concerned about large deposits of funds, especially if these are in the form of checks from friends or family to cover a down payment.
Keep your bank accounts and other financial transactions as level as possible. That helps reduce the risk that you could be facing a denial of your VA loan application. Avoid opening new bank accounts or moving to a new financial institution. Keep everything as it was when you applied for your loan.
On-time payments, made on a consistent basis, are critical to lenders. As lenders consider buyers and their creditworthiness, they nearly always look at late payments. Not only do late payments hurt your credit score, but they also show lenders you may not be managing your finances well. Missing a payment now could put your loan application in jeopardy.
Work to pay the same amounts you normally pay on all of your debt. This includes utilities, credit cards, auto loans and existing mortgage loans. It’s not necessary to pay more than normal. Rather, try to keep your payments as steady as possible to show lenders you’re reliable at making them.
Large deposits can also be a concern for lenders. Often, lenders take a closer look at bank statements towards the end of the closing process to verify that all information is still accurate and up to date.
This is done by underwriters. As the underwriters review checking and savings accounts, they are looking for any large infusions of money. Larger-than-normal deposits may be a red flag to lenders. Where did the money come from? Is there some type of unreported income available to the borrowers? Are there larger gifts being given to the borrower from family and friends?
That doesn’t mean you can’t earn more. For example, you may earn a few extra hundred dollars on your paycheck one week compared to others. That’s not typically a concern. If you have a large deposit that isn’t recognized, this could lead to questions from underwriters and lenders.
An instance may occur where people get married and buy a home at the same time. You may receive substantial money from family and friends at your wedding. Hold off depositing these funds until after the closing, if possible. If that’s not possible, be sure to alert your lender as to what the funds are.
A home inspection is your tool to assess the condition of your soon-to-be home. Most often, these are highly recommended because they provide you with a significant amount of information about the property. Many lenders require a home inspection as well. Home inspections are opportunities for you to walk through the home with a licensed professional. They will talk to you about the age of the main systems in the home, such as the heating, cooling, water heater and roof. They can pinpoint any signs of foundation problems or water damage that could be expensive to repair.
Even when a home inspection is not a requirement, it's helpful to have prior to the closing process. Use the information from the home inspection to negotiate a better price for the home, too, when possible. Remember that the cost of a home inspection may be out-of-pocket for you, but it is money that can provide you with peace of mind.
Taking these few precautions can help reduce delays when closing on your home. If you really need to make a change or something occurs that could impact your ability to meet VA requirements, be sure to immediately let your VA lender know. It could make all of the difference in how long it takes to close on your home.