Just because you’ve signed the contract for your new home, doesn’t mean you’re safe yet. Your credit is monitored right up to the closing date which means that making big purchases and adding to your debt could put you at risk for losing your home before you even own it! Here are 5 things NOT to do before closing on your new home.
No Late Payments
Your FICO score is a big factor when it comes to closing on your home. Having a late payment such as a credit card payment, current mortgage payment, or car payment between your loan approval and closing time will not only cause unwanted difficulties, but could also make you ineligible for a loan for up to a year. It’s never a good idea to miss a payment at any time, but if you’re about ready to close on a new home, it would be best to really stay up to date with all your due dates.
Don’t Add to Your Debt
Bringing in new debt that you didn’t have when you first started filling out your mortgage application can raise concerns about your debt-to-income ratio. When you add to your debt, there will be worries that you will have too much money going out and not enough coming in. The new debt doesn’t even have to be as big as a new car. Simply buying new appliances for your home can put a stop to your closing.
This can affect your FICO score in three different ways. On record you will now have an account with little or no repayment history, a new account/inquiry, and a high balance-to-credit limit ratio. The bottom line is, wait until after your closing is complete to purchase a new car or appliances for your home.
Don’t Change Your Cash Profile
Surprisingly, adding a huge deposit to your cash account can actually be a bad thing! Unless it is your paycheck, any other large source of income needs to be sourced and explained. Big cash deposits can delay the underwriting process and your lender will more than likely not allow you to use the money for your transaction because it can be extremely difficult to source. The best thing you can do when given a sum of money is to maintain good communication with your lender and delay your gifts and transfers for as long as possible.
Don’t Change Your Job Status
One major thing the banks love to see is stability. Changing your job between the time of the loan to the date of closing is the equivalent to waving a red flag in the face of those who are lending you the money. Receiving a promotion or switching to a job with a bigger salary can actually further delay your closing and cause you to present your proof of employment documents again. Switching from part-time to full-time should be okay as long as you’re not doing anything to decrease your paycheck.
Keep Your Accounts Open
Don’t close ANY accounts!!! Having an existing credit account can illustrate good money spending habits! Paying them down or paying them off are completely acceptable but closing them is a big no! If you don’t have any credit accounts open at all, you may want to consider opening one or two! This is something that you can talk to your lender about during the pre-approval process.