Underwriting & Closing
Four last-minute mortgage risks: new debt, credit deterioration, job changes, and unexplained funds, plus a two-week pre-closing checklist.
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Key points
A signed purchase agreement—and even a conditional approval—does not mean the lender has stopped checking the file. Until funding, the lender may reverify credit, employment, assets, liabilities, and whether the material facts in the application remain unchanged.
That is why a buyer who has already ordered furniture, scheduled the move, and is waiting for keys can receive a painful call 24 or 48 hours before closing.
Four categories of risk cause many last-minute problems:
All four point to the same rule: from preapproval through funding, the borrower’s financial picture needs to remain transparent and predictable.
Once an offer is accepted, buyers often feel that the house is already theirs and begin preparing for the move. Common mistakes include:
Even a payment that feels modest is generally included in monthly liabilities and may push the debt-to-income ratio above the program limit.
The lender may see a recent inquiry and ask whether a new obligation was opened. The inquiry alone does not always cancel the mortgage, but the underwriter may require an explanation and proof that no new account exists—or may need to qualify the borrower with the new monthly payment.
Do not assume the lender will never look at credit again after the initial pull. Many lenders use a credit refresh or ongoing monitoring before closing.
Until the transaction has funded and the keys are released, do not submit a new credit application without discussing it with the loan officer. Even an installment plan for a phone can matter.
In one file, the score was around 720 and then dropped to roughly 600 after a reported late payment. That change could have resulted in:
The issue was eventually corrected, but a successful correction is never guaranteed and may take longer than the purchase contract allows.
A credit report is valid only for a defined period under the lender’s policy. A long new-construction timeline or delayed transaction may require a new report. The lender also needs to confirm that the borrower did not add material debt between application and closing.
If an item is inaccurate:
Shortly before closing, the lender may contact the employer or use a third-party verification service. If the employer reports that the borrower no longer works there, is on unpaid leave, or has changed compensation, the income used for approval may no longer be available.
Risky changes include:
An offer letter may be acceptable in some programs, but the program may impose requirements for the start date, salary, contingencies, and first paycheck. A new employer cannot always replace the old one in a single day.
Before funding:
When a job change is unavoidable, the mortgage team should recalculate the file before the buyer removes contingencies or takes another irreversible step.
Consider a buyer with roughly $25,000 in cash intended for closing. Simply possessing the money does not make it an acceptable asset. The lender may need proof of its source.
Common problems include:
A dangerous strategy is to open or use an account the borrower assumes the lender will not see and route new debts or large transactions through it. The mortgage application requires truthful disclosure of liabilities and the assets being used in the transaction. Concealing an account or debt may be treated as misrepresentation.
The proper approach is to:
Bank statements may reveal obligations that are absent from the credit report: a private loan, buy-now-pay-later account, support obligation, business debt, or another recurring payment. The underwriter may request an explanation and include the payment in the debt-to-income calculation.
Beyond the four main categories, a transaction may be affected by:
A useful mindset is that the borrower’s financial profile is temporarily frozen.
Ask the lender to recalculate the debt-to-income ratio immediately. In some files, the obligation may be paid off lawfully, but the source of the payoff and the rules for excluding the payment must be documented.
Stop irreversible actions and notify the loan team. Possible paths may include postponing closing, adding an eligible co-borrower, documenting new employment, using a different program, or canceling under a contingency. Concealing the job loss is not an option.
Identify the cause. If it is an error, gather records. If the balance is real, the lender can determine whether a paydown and rapid rescore may help.
Build the complete paper trail. When the source cannot be verified, the lender may exclude the funds and the borrower will need other documented assets.
A lender rarely “changes its mind for no reason” one day before closing. More often, the final review uncovers something that changed after preapproval: a new debt, credit event, employment change, or unexplained funds.
The most reliable strategy is to make no material financial change and conceal nothing. One short call to the loan officer before financing a car or moving money can save the entire transaction.
The buyer should not do so without prior review by the mortgage team. A new inquiry, balance, and monthly payment may change the approval.
It may. Many lenders complete a final verification shortly before funding.
Yes, but the full transfer trail should be preserved and the movement should be discussed with the processor or loan officer in advance.
Notify the mortgage team immediately, provide complete documents, and do not conceal the event. Time is critical, but some files can be restructured.
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