Make Sure to Avoid These Before Closing On a Home

Estimated reading time: 4 minutes

You’re getting ready to close on a new property. Congratulations! However, you should be aware of these actions that you might take that can raise warning flags with your lender and delay or cancel your upcoming closing.

CHANGES IN YOUR CREDIT ACCOUNTS
This one is a big red flag for lenders. You may have difficulty closing on time (or at all) if a lender learns you have done anything that negatively affects your credit. If you want to make sure your closing goes as smoothly as possible, don’t do any of these: Open any new credit account: For obvious reasons, lenders will not like to see that you have new debt. Their approval of your loan was based on a debt-to-income ratio, and that ratio will change, usually for the worse, when a new account is opened.

• Close a credit account: 
  While this may seem counter-intuitive, closing a credit account can also negatively affect your credit score because your credit history may be shortened. Talk to your lender before closing out any accounts.
• Increase the credit limit (or make a big purchase) on an existing credit card: 
  Increasing your credit line will likely signal to the lender that you are going to be making larger purchases soon. A big purchase increases your debt-to-income ratio, will likely increase an existing monthly minimum payment, and may affect your ability to pay your mortgage. Another obvious result: It will lower your credit score.
• Attempt to make a correction on your credit report: 
  It may be tempting to correct any issues you have recently seen on your credit report but doing so may also result in a red flag to the lender.
  

CHANGE IN YOUR EMPLOYMENT
If you’re thinking of changing jobs while you are waiting to close on a home, now is not the best time to do that. Lenders want to see stability in your employment and your income.

Changing this after a mortgage has been approved but before the closing will most likely require new underwriting and employment verification and could possibly result in adjustments to your loan amount or down payment.

If you feel that you need to change employers or especially change the industry in which you work, you should wait until after you close. The same holds true if you’re married and your spouse is also employed. It’s best for both of you to wait until after the closing.

UNUSUAL BANKING ACTIVITY
It goes without saying that you need to be mindful of your banking activities during the period before your closing. Make sure you don’t deposit or withdraw large sums of money that may indicate to a lender you borrowed that money to get your down payment. A large fluctuation can indicate financial problems. You should also make sure that you don’t cause any overdrafts on your checking account since they could signal monetary distress to the lender.

CHANGE IN YOUR FAMILY SITUATION
Believe it or not, changing your family situation could change your mortgage amount qualification. If you are married, your spouse’s income likely will be considered by the lender to be part of the loan commitment. Losing that income may dramatically alter the mortgage amount for which you can qualify. Conversely, suddenly adding many new family members or getting married may cause your lender to ask more questions. It is always best to hold off on these plans until after you move in.

As always, if you have any questions about your loan status or closing, don’t hesitate to reach out to me! Even if I don’t have the answer, I can help you resolve it quickly with the lender or title company. I’m looking forward to a successful closing for you on your new home!