My clients loan approval was canceled 4 days before settlement. He had been fully approved. We got through the inspection. The house appraised at value. We were getting ready to go to closing in 4 days. And then I got the dreaded call no realtor ever wants to get. 

The lender called me and said , “we’ve got a problem”. I’m going to tell you what happened, What my client did wrong and what you should never do when you’re buying a house. Because his story isn’t the only one. 

So, let’s dive right in

Before we start, I want to be clear. I’m not a lender. I am a realtor and I’m going to share with you my experiences during my 20 years working in real estate as well as some of my colleagues so you know what not to do. If you want more detailed info on anything I talk about, def consult w a lender or ask any questions in the comments and I’ll get one of my lenders to answer them. 

All of these scenarios I’m going to tell you happened after the loan was approved so I’m not going to get into what it takes to get a loan approved. Everyone is different and you need to speak to a lender to see what you need to do.

This is about what NOT to do once your under contract on a house so you dont put your loan approval in jeapordy 

Like I said, my client was fully approved

Had a great job

House had appraised

We were good to go

Well, since he was so excited about buying his first house, he decided to get engaged.

Beautiful. New house. New fiancé. What could go wrong

Everything

He Financed the ring. 

Lender got notified of the new credit pull and the amount of the loan he took to buy the ring.

His credit was great so even though the hard pull knocked his credit score down, it was still good enough 

But his loan to debt ratio or DTI, debt to income ratio went out the window and he was no longer approved for his loan.

Now remember, we were 4 days before closing so all contingencies had been removed.  

He would

Lose his house

Lose his EMD- $20k

And there was no reversing it. 

On top of that, the sellers had a hard date they needed to close by or they were going to get penalized on the retirement funds they were using to buy their new house if they didn’t return the funds by a certain date so they were pissed off. 

They were ready to take his EMD or sue him for it.

Fortunately part of his loan approval was a gift from his mom, so in this particular circumstance, his mom was able to wire him more money than she previously thought she was giving him and he could pay off other loans to bring his DTI back down to an acceptable level to get his loan back approved to buy the house. 

It wasn’t pretty. We had to delay settlement a few days so his mom could get the funds together. 

Big lesson learned!

Some other things you should never do when you are buying a house are:

Buy a car or lease a car- they will pull your credit multiple times 

Apply for cc -Dings your credit score and if you

Use that credit card and it may affect your debt to income ratio

Increase credit line – hard pull

Personal loans from a bank- anything recurring

Cant borrow money to borrow money

And here’s a good one- always Pay your parking tickets! Your credit can get dinged by not paying parking ticket and it went to collection. If it says we’re sending to collection, pay it!!

So remember there are 2 main components to getting your loan approved. Your debt to income ratio and your credit score. Obviously there are more things- work history, assets and other stuff. For this video, we’re just focusing on credit score and debt to income ratio and how doing what my client did messed with his debt to income ratio –

which is basically when you compare the amount of debt you have to your overall income -And made him no longer eligible to get his previously approved loan.