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What Not to Do When Buying a House

You’ve searched, waited, the seller finally accepted your offer, and your future home is under contract. It’s a great feeling! But it’s not quite a done deal. Until paperwork is signed in it’s entirety at closing, nothing is guaranteed.

Prior to close, there are conditions that could complicate closing. Certain things could considerably slow the process down, present stress, or possibly worse; break the deal. That’s why it is so important to know what to do, or rather what not to do, between loan pre-approval and closing.

Below is the advice we give to our clients who are under contract.

1. Do not miss loan or bill payments– It is necessary to stay up-to-date on all loan payments like credit cards and car loans. The lender will look at your credit again prior to closing, and if they see a missed payment it could result in you losing the loan.

2. Do not quit your job or change jobs– Banks don’t like to lend money in unstable circumstances. Consistency in job and salary is a very important factor in securing your home loan. Try and maintain the same job you held when you were pre-approved for the loan. Unless completely unavoidable, do not quit or change jobs until the home is officially yours. Your lender will call your employer one more time to verify employment before closing.

3. Do not start banking at a new institution– Changing banks before closing on your home loan can disrupt everything. Like your job and credit report, banking history and status is an important part of final loan approval. If you are unhappy with your bank, or have a better offer from a competing bank, wait until after closing on your home loan to make the switch.

4. Avoid buying a car or purchasing furniture on a credit card– Your credit score is important. We can’t emphasize that enough. A large purchase or increased credit card debt, can increase your debt-to-income ratio lowering your credit score. You need to maintain all conditions that existed when you were pre-approved for the loan. Do not make purchases that could affect your credit score.

5. Avoid making large deposits into or withdrawals from your bank account– Large deposits not from normal income, will more than likely need to be sourced. It is not out of the ordinary for family members to want to help first time home buyers with cash gifts. If this is the case for you, talk to your lender first. Large withdrawals from your bank account can also be a red flag to your lender.

6. Do not let anyone make inquiries into your credit– When the lender runs your credit prior to closing, you don’t want them to find new credit inquiries. That signals new debt to your lender, and a possible inability to make future mortgage payments. A change in debt to income ration can lead to loan denial.

7.  Do not spend the money you are going to use to cover closing costs or your down payment– Money may be tight, but avoid spending the money you have set aside for your down payment and or closing costs. It can be tempting to start shopping for your new home, but stay strong and hold onto the money you will have to have at the closing table.

8. Avoid being a co-signer for anyone– When you co-sign on a loan, you become financially obligated to that debt. Even though you are not the primary party on the loan, if the lender can’t collect any other way, they will come looking for you to pay. Just like all the points mentioned above, it is important to keep your credit and financial situation constant until you have closed on the house.

9. Do not open or close any lines of credit including store cards– It may seem like no big deal to open an Amazon credit card, but in reality it could easily affect your home loan. Don’t take that risk. Closing a credit card could also prove damaging. For instance, closing a credit card account you’ve had for a significant amount of time could negatively impact your credit history. It’s best just to leave credit accounts as they were when you were pre-approved.

10. Do not ignore questions from your lender or broker– Your lender will need to ask you questions and requests documentation to move you through the closing process. Ignoring emails or calls from your lender, or not sending over the requested paperwork will push back your closing date.

If you must do any of the items above, please check with your lender first to see how it may affect your pre-approval status.

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