Closing on a house is exciting. It can feel a little complicated too, especially the first time you buy a house. So we've put together these tips to help you avoid complications that can sometimes happen during closing.
One general rule of thumb is to avoid making big changes to your finances since this may impact your mortgage application. That's because lenders usually check your financial information again right before the sale closes, and changes to your finances may change your loan eligibility too. Plus there are papers you'll need to sign, documents and forms of identification you'll want to keep handy, and schedules you might need to coordinate with movers, contractors, and more. Check out these 10 tips!
1. Avoid employment changes
Because lenders usually require a verifiable employment history and an explanation of any gaps in employment, any change in employment status may impact your loan application. Alert you lender if you think your employer or employment status might change.
2. Steer clear of new loans and credit cards
Taking out a new car loan, opening a new credit card, or getting a new personal loan can change your credit score. Since credit scores help lenders decide who qualifies for loans as well as the interest rate they charge, it's best to avoid doing anything that might change your credit score before closing.
3. Check before you pay off debts
Paying off loans or closing accounts can also change your credit score. Consult with a qualified credit specialist before paying off debts besides your usual monthly bills.
4. Leave your money where it is
Lenders look for people who move money - especially large sums of money - in or out of bank accounts right before closing. They may ask for explanations and documents about large transfers before they finalize the loan, which can delay closing on your house.
5. Acknowledge receipt of your Closing Disclosure
Federal law requires that you receive a copy of the Closing Disclosure at least 3 business days prior to closing so lenders will need you to acknowledge receipt of the Closing Disclosure in a timely manner. The Closing Disclosure provides information on the actual costs of the loan, including interest rate and loan terms, fees, closing costs, and projected monthly payments.
Read your closing disclosure carefully. Compare the final terms to the terms in the Loan Estimate you received when you first applied for the mortgage. Make sure you understand the information you find in the documents. And ask your lenders questions when you find anything in the closing disclosures unclear.
6. Keep financial documents where you can find them
When you apply for a mortgage, your lender is likely to ask for copies of your W-2 forms, tax returns, bank statements, and other documents related to your finances. Sometimes a lender might ask for a document again. Keep all your paperwork in one place and keep it with you. Sometimes people realize a document they need for closing is already packed in a moving box or packed away in storage!
7. Confirm your closing date before you schedule
There's lots of scheduling to do when you buy a home. If you are renting a home or apartment, you might have to give the landlord notice. You might be hiring movers or contractors too. Make sure you have a confirmed closing date before you lock down dates for these other things.
8. Bring your spouse and maybe a witness too
Many states require spouses to sign documents at closings even when they are not listed on the mortgage or home title. Many states require a witness when closing documents are signed too. You can bring a family member to act as a witness if you like. When you close on your home in the offices of an attorney or real estate agent, they may have people available to act as witnesses.
9. Bring the necessary identification to closing
Most people need to bring two forms of valid identification to a closing. These documents need to be current. You can't use an expired form of identification. Generally speaking, you will need a federal or state issued photo identification document like a driver's license, military ID or passport. For the second form of identification, many times your Social Security Card or a credit card which shows your full name is enough. Confirm with your lender the forms of identification they require before the day of closing. That way you'll be sure you have what you need. Witnesses need identification too.
10. Bring a voided check if you are getting cash out
If you are refinancing a home and getting cash out with your new mortgage, bring a cancelled or voided check for the account into which you want the lender to deposit the money. This check will show your account and routing numbers the lender will need to make the deposit.
Do you have questions about a loan you are closing with Freedom Mortgage? Please call our friendly Customer Service people at 855-690-5900.