You put an offer in on a house. Its accepted! Now its time to get your home loan approved and close on the your new home. Here is what not to do before closing on your new home.
The period of time between an accepted offer and closing home is also called escrow.
While you are in escrow awaiting to close on a home there are things you should not do to interrupt or destroy your financing.
The best advice I can give is status quo is the way to go!
When in escrow on your new home your mortgage company will be working diligently to approve financing of your home.
Your lender will monitor your financial situation thru the entire process by asking for updated documents and pulling credit several times
Do not make any major financial changes while waiting to close on your home to help prevent any issues that could delay or prevent you from closing.
What NOT To Do before Closing on Your New Home
Time and time again, as much as we tell home buyers not to, they will put there mortgage approval in jeopardy. If it doesn’t destroy your ability to get financed it can cause serious delays.
Remember you are in a legal and bonding contract and all deadlines and dates should be taken very seriously. A seller never has to grant you an extension.
Drag Your Feet Submitting Paperwork
Yes it is a pain in the ask the bank seems to want an never ending flow of paperwork. Don’t fight it just get them the paperwork they request immediately. It takes time for the paperwork to move thru the mortgage process. Don’t you be the hang up because it took you a week to get the bank a document.
Also, keep your paycheck stubs and bank statements handy the bank may request new ones before the mortgage process is over.
Go On Vacation or an Extended Trip
Don’t go into escrow knowing you have a two week vacation planned right in the middle. There may be documents to be signed or paperwork to submit that you may not be able to do while you are away.
Time is of the essence when the bank requests a document or needs a signature. Your financing will come to a screeching halt if you delay.
Open New Lines of Credit
It’s exciting buying a new home but don’t rush off and open a furniture store credit card or a Home Depot credit card. Even if you don’t use the line of credit a new line of credit effects your credit score.
The credit reporting agencies look at available balances as part of the algorithm to determine your score. The company financing your home loan will be updating your credit score throughout the process.
As a matter of fact they will pull your credit score with in 24 hours of your scheduled closing to make sure there have been no significant changes.
Make Large Purchases
You may make plenty of money and think you can handle the payments of a new car or boat. Or, even $15,000 of new furniture. But, don’t forget a large purchase will change your credit profile.
Even if you can afford it, a significant purchase on credit will delay your financing as ratios and your credit score changes. Just wait until you close to make that large purchase.
Change or Quit Your Job
Don’t make any changes in your employment. Obviously, quitting a job will affect your ratios and won’t support the mortgage payments.
But believe it or not changing jobs can impact your financing as well. Going from hourly to salaried or losing overtime will force the bank to re-look at your financial situation.
There could be some job changes that can also prevent your financing period. A lender does not want to see you go to one job to a totally unrelated job. If you are completely changing careers, you don’t have the track record to show the bank in a completely unrelated career.
Make Large Unusual Deposits into Your Bank Account
The bank is going to want to see two months of your bank statements and you may have to update them along the way.
It is not unusual for family members to want to give you money to help you get a start with your new home. Just wait until after you close.
Deposits that aren’t connected to a paycheck will have to be sourced and gift letters provided and can cause delays in underwriting.
Don’t Close Any Credit Accounts
Now this may seem counter intuitive but don’t close any accounts just before closing on a home. It might seem like the right things to do, but it is not.
But as a consumer you don’t understand the subtleties of your credit score. How long you have had a line of credit has a huge impact on your credit score.
Say you have four credit cards. Two of them are opened recently one is 2 years old and on you have had for 12 years. But you don’t really use or need the one you have had for 12 years so you decide to close it.
Oops, the period of time you have held that card and made timely payments is important!
Rate Shop
Off course you want to get the best mortgage rate possible. But, the time to shop mortgages is not while you are in escrow.
Every new credit inquiry can put a ding in your credit score.
And, on top of it if you find a lower rate and switch lenders, you might not meet your mortgage contingency deadline.
You are in a legal and binding contract. You could lose a house, if deadlines aren’t met and on top of it lose your escrow money deposit.
Summary
Like I said keeping things status quo is the best way to go. If you keep this the way they have always been you should have no troubles.
Getting financed and having your loan underwritten is complex. Don’t think you can second guess the mortgage lender.
But if you should you have to make a change, talk to your mortgage broker first to determine the best way to handle the situation.
Other Resources:
- Bill Gassett Things You Should Not Do Before Buying a Home
- Kyle Hiscock The Best Home Buying Blogs of the Year
- Paul Sian 7 Smart Things to do Before Buying a Home
- Luke Skar How to Buy a Home With Little or No Money Down
- Jeff Nelson What Credit Score Do You Need to Buy A Home
What NOT To Do Before Closing on Your New Home That Can Derail Your Financing is provided by Kevin Vitali of EXIT Group One Real Estate of Tewksbury MA. If you would like to sell your home give me a call at 978-360-0422 and let’s get the process started.
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