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The Mortgage Quiet Period

Editor's Note: The following is an excerpt from a recent AZ New Homes article by David M Brown.

After your loan is approved, keep a lid on spending until you close.

The "mortgage quiet period" means just that: After your loan approval and before close of escrow, keep as financially silent as you can until you're comfortably moved into your new home. Why? Even though a lender has approved your loan, it's not "wrapped up" until it's funded and recorded with the county. If the funder sees significant spikes in your lifestyle, you might not be moving at all.


Keep your credit calm.

"The key point to remember during this time is not to do anything to negatively affect your credit," said Paris Davis, vice president and Northwest Arizona retail banking division manager for the Phoenix/Camelback office of WaFd Bank.

Many people don't realize they should not make a change in their employment or make purchases of any type that could impact the final approval of their mortgage.

Also, avoid doing anything that may lower your FICO credit score. That important number incorporates credit information about individuals to help lenders predict consumer behavior such as how likely he or she is to pay bills on time or if they can manage an increased credit line.

"They should not open a new credit card or begin to purchase items for their new home using their credit card for the purchases. And the borrower should continue to pay their monthly bills and expenses on time," Davis added.

In addition, don't apply for any new credit accounts. These "hard inquiries" requested by you can lower your FICO score. Some vendors may pull a new credit report within 72 hours prior t closing. Any changes will require new explanations and possibly result in your loan being delayed.

Large non-regular deposits into your bank accounts will require source information: Is this a loan? Be prepared to offer explanations with supporting documentation.

Of course, avoid overdrafts to your checking account, verify that you are up-to-date on any income taxes due (or have filed for the appropriate extensions) and be prepared to provide updated bank statements and pay stubs prior to closing. Following these steps can make the difference between a smooth closing and a bumpy experience.

Do everything you can not to add to your Debt To Income (DTI) ratios, a key determinant of loan approval. Lenders pull credit again to verify the borrower's DTI ratios are still in line with the loan program and that the borrower is not overextended," Davis said.

Financial institutions will complete the borrower(s) are still employed and can pay back the loan, she pointed out.

Cautionary tales

Davis has had clients purchase a car for their new garage before they were in the new house. "Or clients thought it was okay to change their career during this mortgage quiet period only to find out that is not a good idea and could impact the final approval," she said.

One couple even took a quick celebratory vacation before closing. "The car broke down and the trip cost more than they anticipated," she recalled. "Of course, they put the car repair on their credit card. The lender had the last-minute credit pull and their ratios had risen so high they could no longer qualify."

Now that was an expensive - and heartbreaking - getaway.