Avoiding Real Estate Pitfalls; Things to Avoid While in the Process of Purchasing or Refinancing
The most labor intensive part of your quest to close on your new home will be providing your banker or lender with all of the financial records and information they require. Equally, during a re-finance of your existing home, many of the same financial records will be required. In either of these situations, the process is started by the application process, and moves through the underwriting process until the loan is clear to close. During this time period, which may span from 30 days to several months depending on the complexity of the loan program, there are several things to remember as to not hinder a smooth closing process.
First, as an applicant, you never want to open new credit cards, switch credit card balances to new credit cards or make large purchases on existing credit cards during this process. Remember, although you may transfer a balance, it takes several weeks for that old line of credit to show on your credit as closed out. Also, even the smallest of purchases on a new card may open up a much larger available line of credit. All of these actions can disrupt your income to debt ratio which can create a major obstacle in getting to that clear to close position. This helpful hint applies to both new home purchasers and existing homeowners looking to re-finance.
Second, in situation where you may be re-financing your existing home, make sure all home improvements that may be ongoing are complete prior to appraisal. One of the steps of getting any loan is to have a formal appraisal completed. That appraisal can only take into consideration working bathrooms, kitchens, etc. So, if your home is having the second bathroom renovated, the appraiser may be required to come back for a follow-up appraisal when that work is completed. Avoid this delay and make sure you properly plan the timing of your re-financing and home improvement projects, especially if your re-finance is going to provide the extra money to accomplish those home improvement projects.
Third, it is important to make sure you are prepared for closing and have enough money saved to bring to the closing table. Many times a lender or bank will advise that their loan covers closing costs. However, this may mean that only the bank costs are covered. In just about all loans, there are third party costs, such as payments to insurance companies, surveyors, title companies, homeowner associations, tax offices, municipal utilities, and many more. It is important to communicate with your banker or lender and review your mortgage documents that outline closing costs that are your responsibility.
The above items may be overwhelming and we at R.C. Shea and Associates can help you through this process.