Buying a home in today’s marketplace is a rigorous process with plenty of ups and downs—as well as at least one or two common closing delays. If you’re lucky, you’ll make it to the finish line and end up with the keys to your new home. Sometimes, though, your residential mortgage can get delayed for so long that you lose the house you’re hoping to purchase, which can be enormously frustrating and discouraging. While some issues aren’t preventable, others are, and knowing what to expect can reduce your anxiety and frustration as well as give you the means to prepare to minimize common closing delays that may occur.

As a follow-up to our last post, we’ll use a Q&A format to again address a few more of the most common closing delays that borrowers run into, explain why they occur, and offer advice for dealing with them.

Q: Our offer on our dream home was just accepted! We want to buy new furniture right away! Should we use our credit cards or cash to make these purchases?

A: There are many potential disastrous moves that buyers can make during the closing process—and making poor financial decisions before closing represent some of the most common. To understand this issue, you first need to know what a debt-to-income ratio (DTI) is. In other words, a calculation involving how much money you make each month versus how much money in monthly debts you need to pay.

Know Your DTI

The first number includes most sources of monthly income, while the second number includes your (new) housing payment, property taxes, mortgage insurance, credit-card minimum payments, and loan-installment payments (this number must not include living expenses). Your expenses are then divided by your total income to come up with a percentage.

While different loan programs have different debt-to-income requirements for their borrowers, most while require your DTI be under 43%. So, what does this mean for you?  One of the first things your lender will do is run your DTI to make sure you qualify. Once you identify and make an accepted offer on a home, the closing process will begin. However, even when you don’t encounter any common mortgage delays we discuss here, it generally takes about 45 to 60 days to close on a new home. And this is when trouble—of the buyer’s own making—often brews.

Keeping Your Spending in Check

Excited by the prospect of a new home and possibly even a different type of lifestyle, borrowers all to often start making purchases. From an expensive living-room set to a new riding mower or a king-size bed, borrowers tend to spend money during this process without realizing the toll it may take on their debt-to-income ratios. Putting any new purchases on a credit card, or, even worse, buying a new car, will negatively impact your DTI and can even push that number up above the threshold your lender has set. Then, when your lender runs the numbers again right before closing day, you may find you’re no longer qualified to purchase that dream home of yours.

Using Your Cash Reserves

But what about if you pay for that new furniture with cash? Well, you can certainly go this route, but consider that there are many unexpected expenses. As these often arise during the home buying process, we strongly caution you against making any unnecessary purchases whatsoever.

For example, you might find out just a few weeks prior to closing that you don’t qualify for a 3%-down loan program and end up having to come up with an 5%-down payment to purchase your home (though a good lender will thoroughly vet your eligibility for such a program very early on in the process to prevent this from happening). Or, perhaps you’re selling your current home at the same time and you discover certain necessary repairs to sell it.

Stay the Course

In any case, making poor financial decisions before the closing can negatively impact your DTI and reduce the money you’re able to bring to the closing. By avoiding unnecessary spending, you can avoid falling victim to this common closing delay. Instead of opening new credit-card accounts or racking up charges on your existing cards, focus on keeping your credit rating steady and making your payments on time every month. And, of course, wait until you’ve signed the mortgage-closing documents to make new furniture or appliance purchases.

Q: We just began the closing process on our new home and we’re eager to avoid paperwork delays. What’s the best way to keep things moving?

(Note: For the sake of brevity, in the answer that follows, the term “broker” may refer to your lender or broker—whomever you’re working with to close on your home. Also, feminine pronouns are used to represent both genders.)

A: A mortgage loan is a complex financial product that requires a tremendous amount of paperwork. You’ll be asked to produce bank statements, tax returns, and pay stubs, as well as written explanations to address specific aspects of your personal or financial situation (such as explaining the mortgage you released via a deed-in-lieu, for example). Appraisers, title companies, and inspectors will produce reports and your broker will provide you with closing disclosures. Also, updated purchase agreements may be needed if new information is discovered during the closing.

What You Can Do

As you can see, there are many documents that must be produced and shared. It’s critical that the flow of documents be unhindered and that everyone involved works to move quickly to keep the process on track. That’s where you come in. As the saying goes, the squeaky wheel gets the grease, and this adage rings true when you’re going through the closing process for your new home.

While it’s your broker’s job to facilitate the closing process, you can help by checking in regularly (about once a week) with her to ensure she has everything she needs at that time to process your application. If your broker asks you for a certain document, be sure to respond quickly and get it back to her as soon as humanly possible. Likewise, if your broker has indicated she will follow up with you regarding a matter by a certain date, be sure to circle back with her if that date has passed without a word.

Staying Connected

The same approach goes for keeping tabs on your attorney, realtor, and other professionals. Thus, when you check in with your broker, you should find out whether she’s waiting on anything from other parties and, if necessary, call or email those individuals to politely nudge them along. Also, you should be prepared to produce updated paystubs, bank records, and more again and again throughout the process. The more quickly you can provide these documents to your broker, the better your chances are of closing on your new home on time!

In Closing…

We hope that, by knowing what to expect, you’ll be better positioned to avoid many of the most common closing delays. Even if you can’t circumvent them completely, knowing how to handle mortgage delays can help you efficiently manage and overcome them as they arise.