Eight tips for a pain-free closing day

Keep these eight tips in mind to overcome obstacles in closing on your new home:

• Stay in Your Current Job

Keep your employment stable unless it’s absolutely necessary to make a job change. Lenders like to see a consistent work history and changing employers

can create an uncertainty about your future, particularly if your salary is commission-based.

When you are approved and underwritten for a loan, it is contingent upon your financial situation at the time of application. If there is a change in your financial position, you need to contact the lender, and they may have to re-underwrite your loan, particularly if the change is significant. This can cause delays in your closing.

• Wait to Move Money Around

To ensure quality control and eliminate potential fraud, many mortgage lenders require you to document the source of all of your funds. You may have to provide a paper trail, including cancelled checks, deposit receipts and other data. Moving money around between checking and savings accounts, money market funds, stocks, mutual funds or even retirement accounts could leave you and your lender with an extreme headache trying to properly document it all.

• Hold Major Purchases Until AFTER Closing

Why? The biggest reason is to stabilize your debt-to-income ratio, the percentage of your gross monthly income (before taxes) that you spend on debt such as monthly housing costs, credit cards, installment debt and car payments. A major purchase reduces the amount of income you have available for your home mortgage. And reduced income may convince the bank you can’t afford a new home. Wait for that new car or home entertainment system until after closing. At closing, lenders often are required to recertify your loan application to ensure its accuracy. If you’ve taken on more risk since your initial approval or opening a new line of credit, you could put your loan in jeopardy.

• Use a Third Party to Manage a FSBO Deposit

Many war stories have been told about For Sale By Owner (FSBO) sellers who spent “good faith” deposits prior to closing. When the transaction is canceled for valid reasons such as repair or financing issues, buyers have to battle for a refund. Put the deposit in a trust account and find an attorney or other third party who will safeguard it until after closing. Be sure to state in your contract what happens to the deposit if the transaction doesn’t occur.

• Keep Your Emotions in Check

Most likely you have fallen head over heels for your new home. Buying a house is a business transaction, and you must have a cool head throughout the deal. Try not to fall so much in love that you ignore major repairs you can’t afford, while keeping in mind no home is perfect. Avoid walking away from a terrific home because of a seller’s refusal to do a small repair.

• Work with Builders and Be Realistic

If you’re building a new home, be proactive and work with your builders early on. By getting involved early, you will receive more cooperation from the builder and a wider variety of choices. And most importantly, you won’t be waiting to close because your dream home isn’t ready.

On another note, if your new home’s closing is contingent on selling your old home, be realistic about its sale. You don’t want your new home purchase to fall through because your old home is still on the market.

• Estimate Closing Costs Well in Advance

Closing costs can often be as much or more expense than the down payment to purchase a new home. Always have sufficient funds for closing costs, and keep a buffer of extra money to cover unanticipated costs. It’s also advisable to keep in close contact with your lender so that you know what to expect come closing day. Understand the numbers and don’t hesitate to ask questions, so that you fully understand the lender’s requirements. The more you know going in, the easier it will be to buy your new home.

• Remember to Hire Representation

Chances are the seller has a broker. Make sure you have good representation on closing day, whether it is your broker, attorney or both. Having representation ensures that all bases are covered and no detail is missed.

For more information on buying a new home, contact the Spokane Home Builders Association at 509-532-4990, or visit the National Association of Home Builders website at www.nahb.org/forconsumers.