If you are in the process of buying a new home or refinancing your existing home, there are a number of actions that you absolutely should not take prior to closing. In no particular order, here are the top 10 ways to not screw up your deal:
Don’t buy a car
This one is self explanatory. Don’t buy or lease an auto before closing. Also, don’t trade in an auto. There are examples left and right that someone traded in a car, and the lender saw it on a soft credit pull 3 days before the close. When the lender sees a new trade line, it becomes an issue. It becomes a huge headache to document–including going back to the dealership, showing the old car was paid off, verifying the new payment, then you have to go to the credit burea and have it fixed. This kind of thing adds a ton of issues and can put your financing in jeopardy particularly if your debt to income ratios are in question.
Don’t move assets around
Anytime an asset is moved from checking to savings, or a distribution from an IRA–all the transfers have to be documented to your lender. It makes it very simple to keep things in a savings account without transferring the funds.
Don’t change jobs
There is a verbal verification of employment before closing on every loan. When you are no longer working at the job you indicated on your mortgage application this really can screw up your ability to purchase or finance a home. On top of that, you really don’t want to switch professions when you have a mortgage application in and before you have closed. Verifying the new employment can add a ton of issues that otherwise do not need to be there.
Don’t buy furniture
People have the tendency to get so excited about a new home that they rush out to the furniture stores with a floor plan in hand and start dreaming about all the nice new furniture they can put into their new home! The problem is that the dream turns into reality when the furniture salesmen does his job and offers easy financing!!! All of sudden the new home you need the furniture for is in jeopardy because of the furniture you want to put into. Patience is a virtue, so don’t run out and buy furniture until after the closing.
Don’t rack up credit card debt
When your credit card balance jumps from $2,000 to $11,000 before the closing, the lender is going to see this with a soft credit pull. It also adds to the debt to income ratio–and the buyer in this example had to pay off their credit card in order to close on the house.
Don’t go out and apply for new debt
Here’s a recurring theme–there is a soft credit pull before your close on your loan. Any inquiry for new debt is going to put your loan at risk. Just don’t do it–and this applies to furniture, appliances, Sears, Wal-mart–whatever. Just say no.
Don’t consolidate bills
Bill consolidation is best left for another time and can screw up your closing just like the rest of these items.
Don’t pack up all your financial documents and tax returns
You may need something prior to close, and if it’s in a trailer, truck, or storage location you can’t access, you could be in trouble.
Most of this stuff should be pretty self explanatory, and these are just reminders for you. Basically the message is don’t take any financial action prior to close!!
If you have any questions or comments, let us know we’d be happy to help! Dan (952) 473-1000 or Elisha (952) 473-9000.