So you have your conditions waived and your contract is binding for the purchase of your new home. You think this is awesome. Now I can go and buy that new truck and furniture and I’m lease the truck. The furniture company is giving me an amazing deal with buy now/pay later. You get your loans and feel great. Then you get a call from your mortgage lender telling you: sorry you no longer qualify with your new debts.
Can they do that? Yes they reserve the right to do another credit check and employment check just before possession and can decline you at that point. Is it right? No, cause you could go the day after possession and take out the same loan without having to jump through the whoops. But these are the lender rules.
Here are some pointers what to NOT do between condition waiving and closing:
- Don’t take on any new loans or max-out credit cards and lines of credits! A $400 monthly payment will decrease your mortgage power by about $70,000 depending on income. You say, well I will just through it on my interest-only line of credit. With rule changes over the years we are not allowed to use interest-only payments. For an unsecured line of credit we have to use a 3% debt payment. So if you have a $10000 balance, we have to use a $300 payment for that and yes it can affect your numbers.
- Don’t quit your job before possession! This can be doable on the strength of the overall file but will require an exception with the lender. If you are transitioning into a different job at a different company the lender might grant an exception. It will certainly make things a little more complicated and hopefully your exception is granted. If at all possible wait with a job change til after possession so you don’t compromise your closing and may lose your deposit.
- Going from employed status to self-employed status. Both of these are qualified completely different by lenders. For traditional lenders you need an average of two years as self-employed. So you may no longer qualify with your lender and we have to look for a different lender who will work with the new status. This could completely change the dynamic of your application and jeopardize qualifying.
If you cannot close your purchase anymore because of any of the above reasons you can lose your deposit and the seller can take you to court for any losses on their end.
It’s best to leave any of these til after taking possession. You will save yourself a lot of stress. If anything you should talk to your mortgage expert if you are thinking about doing any of the above. A good mortgage expert should tell you all the implications a decision like this might have.
Keep it simple and don’t change anything from condition waiving to closing the deal .