Congratulations! You decided you weren’t going to waste time looking at houses you didn’t know you could afford, and 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 has had the wind knocked out of their sails at some point in a real estate transaction by a few missteps. Pre-Approval is just the first step in obtaining financing for your new home. It is wise to steer clear of the following “Don’ts” until after closing.
• Don’t take on any new debt. The temptation can be strong. There are so many big purchases that people often want to make in connection with a move: appliances, window treatments, furniture, etc. When you add to this the fact that so many places these days offer easy terms and no money down scenarios – well, why not just do it? Answer: because you will change what the mortgage industry calls your debt-to-income (DTI) ratios (the relationship of your income to your debt), which could move you beyond the financing threshold that preapproved you.
• Don’t pay on any “negative” items on your credit report. This temptation can also be strong. But don’t do anything unless your lender advises you to. Doing so can bring the items current and up front to your credit report and lower your score. Talk to your lender first.
• Don’t let anybody run your credit. 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 shopping in the furniture store. At least, don’t let anybody run your credit. Why? Because each time your credit is run it is reported by the credit agencies, and it is detrimental to your credit score. You want to keep your score as high as possible during this time.
• Don’t share any plans you have for the home after you move in. Thinking about remodeling the kitchen, finishing the basement, or putting a pool in the back yard? Keep these plans to yourself. The reason is similar to the above – you could cause a lender to recalculate the DTI.
• Don’t change jobs. Try not to make a career move during the time between your mortgage application and the closing on the home. But, you ask, “What if it’s a BETTER job, for MORE money, in a DIFFERENT field?” Stay strong and try and wait until AFTER closing. One of the factors mortgage lenders consider is length of present employment – and they are very partial to stability.
• Don’t 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.
• Don’t lease or buy a new car. Of course, this is really under the general heading of “no new debt.” It is highlighted here because, for some strange reason, many buyers do run right out and lease a new car during the time between mortgage application and closing!
In summary, do nothing that negatively impacts your ability to complete your mortgage loan and get to closing.
Important note: The lender will recheck your credit as close as 24 hours before closing, so don’t think you are “in the clear” when the lender says “cleared to close” a few days prior to closing.
Get into the house first.