The big day is almost here. You got preapproved for a favorable mortgage. You scoured listings for weeks – maybe even months – to find the perfect house. You submitted an offer and the seller accepted. And now, so close to the finish line, it could all be for naught if you make one of the mistakes we're going to talk about. Instead, stay informed with your real estate agent and, above all else, don't do these things before closing on a new home.
Apply for New Credit
There is quite possibly no worse time to open a new credit card account than before you've closed your home purchase. Think of your mortgage preapproval as a snapshot of your credit, debt, and income situation at that moment. Opening a new line of credit alters that snapshot and could give you a lower credit score, causing your lender to reevaluate everything.
Buy a New Car
We don't necessarily mean new as in brand new – though it of course applies – but rather any new vehicle that is new to you since you were preapproved. That new set of wheels likely comes with a large loan of its own, and trust us, your lender will not like that.
Start a New Job
Another thing you shouldn't do before closing is starting a new job. A reliable source of income is critical to securing a mortgage loan; embarking on a new job brings with it inherent questions of stability and security. If possible, it's best to wait until after closing to pursue the fresh start you've been craving.
Use Credit Cards Excessively
Putting more and more purchases on a credit card increases your credit usage, which can have repercussions on your loan eligibility. What's more, it's a good idea to make sure your bills are paid up or at least not delinquent. And while you're at it, be on time with all your payments until your loan is finalized – the last thing you want to do is send up a red flag to your lender by way of late payments.
Make Any Big Purchases
This could be a tricky situation to avoid before closing. Furniture, appliances, and other essentials will be calling your name, and while some of them may feel like necessary purchases, they're also expensive investments. Paying for them upfront could eat into the money you've saved aside for closing costs – do NOT do this! – while financing or using layaway adds another line of credit to your name.
Make Any Unexplainable Deposits
Your lender will know what your income typically looks like, so an unexpected deposit of, say, $3,000 will create unease on their end. If you have a paper trail, that helps. Your best bet is to just wait until after closing for big, out-of-the-ordinary deposits.
Co-Sign a Loan for Someone Else
It's just a favor for a friend or family member, right? Wrong. Co-signing a loan for someone else makes you responsible for said loan. Should the borrower fall behind on payments or default, you're the one the lender will be coming after.
It's always wise to consult with your agent whenever you have any questions about what you shouldn't do before closing. Find a Watson agent when you're ready to start your home search.