You might think that once you’ve scheduled your closing, that the end is finally in sight… and it is! But that doesn’t mean you should fly off the handle and start doing crazy things in the name of celebration. Why? Because you’re not officially out of the woods – there are things that could still affect your closing, and things that may make the deal fall through. So any move you make before you sign the last of your paperwork and get your keys is being scrutinized by your lender, your real estate team, and everyone associated with your home purchase. Because of this, it’s helpful to know what not to do during closing.
When you’ve spent all your time getting your finances in order and you’ve been approved for your loan, it can be tempting to run out and rack up your cards – or apply for all sorts of new credit once credit companies see you qualified for a loan. Don’t make the mistake of going on a home shopping spree before you sign your closing documents.
Why? Because your Lender will be keeping an eye on your financial condition all throughout closing, so making sudden financial decisions that increase you debt obligations and may affect your credit score will immediately give them pause for concern.. They’ll immediately re-assess what your new obligations will do to your debt-to-income ratio, which may affect the monthly cash available to pay your loan payments – at least, in their eyes. Don’t give the banks any reason to not trust you… do your shopping spree after you’ve completed closing.
When you’re considering getting everything new, like a new house and new furniture to put in it, it can be tempting to extend the newness to a car that may accent your new driveway. But remember, taking on a new car purchase or lease will affect your debt-to-income ratio, which as you already know, the bank is watching like a hawk. It’ll also affect you credit score because of the credit inquiry that comes when a dealer runs your credit to see if you qualify for the vehicle. Hold off until after you close – and better yet, think about saving that money to invest in your new home, or save for emergencies.
Another mistake a borrower may make before they’ve completed their closing: switching jobs. Remember that when lenders are considering you as a viable loan candidate, they look at your employment history, and they look to see how long you’ve been in your job. Switching your job at the last minute before you complete your closing may present additional problems and may delay your closing. Even if you leave for a higher salary, your income was validated and paystubs reviewed from your old job and all of that must be redone and re-validated and it may be hard to get proof of income or paystubs from your new employer. Again, this is another situation where you’ll want to wait until after you close to make the switch.
If you’re having issues coming up with your down payment, many borrowers withdraw from their 401(k) or IRA accounts, but don’t take cash advances on your credit cards. The cash advances may reduce credit score and increase your debt ratio, and the interest rate will be higher to repay. Likewise, make sure your down payment is in your account at least a couple months before completing closing. It helps with your image as a stable candidate, and saves you from having to explain how all that money came out of nowhere and popped into your account the day before closing.
Remember, we’re not saying you can’t do any of these things – we’re just saying be smart and wait until after closing, provided you can handle the added debt.