You decided you weren’t going to waste time looking at houses you didn’t know if you could afford. Instead, you visited with a lender or two and presented your financial case to buy the home of your dreams.
And the lender says – “All is in order and we can pre-approve you. Go forth and find that new home!”
It’s smooth sailing from here, right? Probably.
However, more than one buyer I have helped in my career has had the wind knocked out of their sails at some point in a real estate purchase by a few missteps.
It is also best to steer clear of the following “Do Not Do’s” until after closing.
Do Not Take On Any New Debt
The temptation can be so strong. You are excited. There are so many big purchases you often want to make in connection with a home purchase: new appliances, window treatments, furniture, etc. This includes no new car too!
When you add to this the fact that so many places these days offer easy terms and little or no money down scenarios – well, why not just do it?
Answer: You should not take on any new debt once you are pre-approved for a home loan because you will change what the mortgage industry calls your debt-to-income (DTI) ratio, the relationship of your income to your debt. This could move you beyond the financing threshold that preapproved you. And this could derail the deal.
Do Not Let Anybody Run Your Credit
Closely following the first thing, avoid activity that could involve getting your credit checked. Like signing up for a new credit card or co-signing for a family member or any shopping in the furniture store.
Because each time your credit is pulled it is reported by the credit agencies, it is detrimental to your credit score. You want to keep your score as high as possible during this time.
BTW, an interesting side note: Applying to more than one mortgage lender does not negatively impact your credit score.
Do Not Pay On Any “Negative” Items On Your Credit Report
This temptation can be strong. While commendable, doing so can bring the items that perhaps have been in the long-term past to current and up front in your credit report. And lower your score. Do not do anything unless your lender advises you to. I say again: Talk to your lender first.
Do Not Share Any Plans You Have For The Home Until After You Move In
Thinking about remodeling the kitchen, finishing the basement, putting a gazebo or putting green in the back yard? Keep these plans to yourself. The reason is similar to the above – you could cause a lender to recalculate your DTI.
Do Not Change Jobs
Have an opportunity to make a career move? Doing so during the time between your mortgage application and the closing on the home can be problematic.
But … you ask, “What if it’s a BETTER job and for MORE money … and in my SAME company?” This is likely ok and helps your DTI ratio.
However, if the last phrase is instead “… and in a DIFFERENT field?” Not good.
Stay strong and wait until after closing. One of the factors mortgage lenders consider is length of present employment – and they are very partial to stability in the same organization and especially in the same field of work.
Do Not Pack Too Soon
Well, go ahead and pack your clothes and dishes.
But do not pack your bank statements, tax returns, or other important paperwork. More than one buyer has had closing delayed because additional paperwork was required right before closing. Pack these last into the moving van.
Important Final Note
The lender could recheck your credit as close as 24 hours before closing, so do not think you are “in the clear” when the lender says “cleared to close” a few days prior to closing.
The thing to remember is all of this: Get through closing and into the house first.