Declare Independence From Mortgage Closing Crises

Don't make these horrendous mistakes when applying for a mortgage.

Jul 4, 2014 at 2:15PM

In the spirit of the upcoming Fourth of July holiday, I've prepared some examples of real-life closing crises you'll want to keep in mind if you're thinking about applying for a mortgage in the near future. These are the most common mistakes that are made during the loan process, and they can quickly turn the process of closing on your dream house into a nightmare.

Job hopping
I was sitting at a closing last year with a customer, and while he was signing the papers, he glanced at the employment section of his loan application, and casually mentioned that he wouldn't be working there effective the next day. He thought that because we had already approved the loan, his employment wouldn't be verified again. Here's the deal: Employment will be verified prior to closing, on the day of closing, and often after closing.

If you have any plans to leave your job, let your mortgage professional know up front so there isn't a closing crisis. In the example above, my customer was OK, because his wife made enough to qualify for the loan on her own. Often, though, these last-minute employment changes can prove disastrous.

New credit
The loan's approved, the moving truck is scheduled, notice has been given to your landlord, and you're about to go get the keys to your dream house. Suddenly you get a panicked call from your mortgage professional, who has noticed a bunch of inquiries at the local furniture store and a local car dealership. You casually mention that you bought a sofa set and a new canopy bed for the master bedroom, financing at 12 months "same as cash." And the kids are getting bigger, so you needed a minivan and couldn't pass up the 2% financing over the Fourth of July holiday weekend.

The problem: The new debt puts your debt ratios completely out of whack, and now the loan is on the verge of being turned down. With debt ratio requirements the strictest they've been in recent history, this mistake can be devastating. Don't make any changes to your debt until you have the keys to your house. Lenders can and will run credit "refreshes" all the way up to the date of closing to verify no new accounts have been opened.

Follow the money
You've signed the closing papers, and you've handed over your cashier's check for the down payment. Your mortgage professional starts sweating when he notices which bank the check is written against. The problem: It's not an account that was disclosed on the initial loan application.

What's the big deal? You have a couple of extra savings and checking accounts you keep chunks of cash in, and for privacy reasons you only like to provide the accounts that are needed for the loan approval; nobody at the lender knew this account existed until today.

But because of all the money laundering and mortgage fraud schemes of the housing boom and bust, lenders always want to know where the money is coming from up front. Make the decision about which account you will use from day one, and stick with it all the way to closing to avoid an 11th-hour crisis.

These three real-life closing crises all have one thing in common: They all could have been avoided with some extra communication before the process began. Job and income changes, sudden increases in credit, or changes in where your money is coming from should all be disclosed as early in the loan process as possible in order to keep your home purchase from blowing up like an Independence Day fireworks show.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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