Your offer on your new home has been accepted and you’re now in ‘escrow.’ This is an exciting moment: it’s the final stretch before officially becoming a homeowner! Before you start celebrating, there are still a few more tasks to navigate before you get the keys.
During the escrow process, your lender or broker is working behind the scenes to finalize your home purchase. However, some buyers don’t realize how their actions may end up delaying the closing. Here are the top 6 money mistakes to avoid before closing on your new home.
1. Close or open credit accounts
Don’t do anything that will change your credit! Opening new lines of credit (like that store credit card to save 10% on the new furniture you’ve picked out) can put your closing at risk. Lenders will pull your credit report again during closing to make sure your financial history is stable. If you being adding new debt or increasing your credit limit, they’ll believe you need financial support and may not be able to meet your loan obligations.
This also includes paying off debt. Paying off a debt or closing an account helps in the long run (less debt is always good) but hurts in the short run. How? When you pay off debt and close the account, the average age of your open accounts decreases. It also throws off the different types of credit you have (or credit mix). Your credit score is partially impacted by those factors so when you pay off a loan, your score will take a temporary hit before climbing back up. A few points can be the difference between getting approved or not.
Avoid the temptation to look at your credit report as well. If you do, don’t try to correct any errors. The best time to do that is before you go under contract for a home. The next best time is after you’ve closed on your home. Disputing errors can trigger a new credit report, which can delay closing. Mistakes aren’t fun but wait it out until after you’ve closed.
If you’re not sure, always check with your lender or broker.
2. Paying bills late
Remember: a pre-approval isn’t a guarantee of a loan; most lenders will request a new credit report a few days before loan closing to verify your information so do what you can to keep your credit steady. This means, staying on top of your bills during closing. A series of late or skipped payments will lower your credit score and make lenders hesitant to approve your loan request.
3. Buy big-ticket items
Now is not the time to start spending, whether you’re buying a new car or need furniture for your new home. Taking out additional loans or opening lines of credit for the discount will jeopardize your loan approval. Don’t harm yourself by buying these items. Wait just a little longer until after you’ve closed.
4. Change jobs
Mortgage lenders love stability; they want to know you have a demonstrated history of debt repayment, employment, and income. That’s why you should do what you can to stay in your current job until you’ve completed the closing. Changing jobs can delay the closing process since lenders will need to reverify your employment. Starting over at a new company can be detrimental to your loan approval so if you can, wait until after closing to make any changes to your employment status.
5. Make large deposits from unknown sources
Most homebuyers scramble to get the funds needed for their down payment and closing costs. Large deposits outside of your regular income will need to be sourced, whether you cashed out some investments, received monetary gifts from family, or sold a car. Your lender will want to know where this money is coming from and that it’s being given to you freely without expectation for a reward later. If you do have a large deposit coming, give your mortgage broker a heads up and take careful notes on where it came from.
6. Ignore your lender or broker
The escrow process is time-sensitive and is filled with paperwork. It’s important to stay in contact with your lender or broker and submit information or answer questions in a timely manner. Any delay in responding to them will ultimately delay your closing.
The time between contract and closing is busy and exciting. Being careful of your actions will make sure your closing goes without a hitch. Your lender wants to make sure you get your new home. They’re there to help navigate through this tricky process so if you have any questions, make sure you ask!
When you’re ready to start looking at new homes, we’re here to help. FCB Homes builds homes with more of everything you love: more innovation, style, and value. Visit us online at FCBHomes.com to learn more about our new home communities in Lodi and Riverbank.
