Make Sure to Avoid These Before Closing On a Home

You’re getting ready to close on a new property. Congratulations! You’ve made it through a lot of important decisions already, and now the goal is simply to protect the progress you’ve made. Your lender may continue verifying financial information right up to closing, so this is a good time to keep things steady. If you’re considering a significant change involving your credit, income, employment, or money, a quick conversation with your lender before acting can save you from an unwelcome surprise later.

AVOID UNNECESSARY CHANGES TO YOUR CREDIT
Your mortgage was approved using a particular financial picture, including your existing debts and credit profile. Before closing, try not to change that picture unnecessarily. Lenders may check for new credit activity or additional debt before finalizing the loan.

Here are a few situations where asking first is usually the better choice:

  • Opening a new credit account:
    Maybe you’ve found the perfect furniture for the new house, or your car suddenly needs replacing. Before financing either one, talk with your lender. A new account or monthly payment may need to be included in your debt calculations, and it’s better to know the effect before you commit.
  • Running up existing balances:
    A large purchase on an existing card can increase both your balance and required monthly payment. If the purchase can wait, waiting is usually the simpler option. If it can’t, ask your lender whether it could affect your qualification.
  • Closing or making unnecessary changes to existing accounts:
    Even a change that seems financially responsible can affect your credit profile in ways you may not anticipate. There’s usually little advantage to reorganizing credit immediately before closing, so consider leaving existing accounts alone unless your lender recommends otherwise.
  • Starting a credit dispute or trying to make a last-minute correction:
    If something on your credit report is wrong, you certainly don’t need to ignore it. But timing can matter. Ask your lender how best to address the error so a well-intended correction doesn’t create additional underwriting questions just before closing.

DON’T CHANGE YOUR EMPLOYMENT WITHOUT TALKING TO YOUR LENDER
Changing jobs doesn’t automatically mean there will be a problem with your mortgage. The better question is whether the change affects the income and employment information your lender used to qualify you.

A different employer, compensation structure, reduction in hours, move from salary to commission, switch to self-employment, or leave of absence may require additional documentation or underwriting review. Some changes are relatively easy to work through. Others can affect qualification.

If the change is optional, waiting until after closing may make the process easier. If it isn’t optional—or the change has already occurred—tell your lender promptly. You don’t need to decide whether the change matters. Let the lender help you determine that.

BE CAREFUL WITH LARGE OR UNUSUAL BANKING ACTIVITY
Your lender may need to document the funds being used for your down payment, closing costs, and required reserves. That doesn’t mean you can’t deposit or move your own money. It means you want to preserve a clear paper trail when you do.

If you’re receiving a gift, selling an asset, transferring a substantial amount between accounts, making a large deposit, or completing another significant transaction, ask your lender what documentation to keep. Likewise, before spending or moving money you expect to use at closing, make sure doing so won’t create a shortage or documentation problem.

Try to avoid overdrafts as well. The goal isn’t to make your financial life stand still. It’s to make the source and availability of your closing funds easy for the lender to verify.

DON’T MAKE MAJOR FINANCIAL CHANGES WITHOUT CALLING YOUR LENDER
If you remember only one thing from this article, make it this: when you’re unsure whether something matters, ask before you act.

A change in income, new debt, different source of closing funds, large transaction, or other financial change may have no meaningful effect on your loan. Or it may require additional documentation or underwriting. A short conversation can help you know which situation you’re dealing with before it becomes urgent.

KEEP YOUR CLOSING FUNDS READY
As closing gets closer, keep the money you’ll need accessible and review your Closing Disclosure carefully when you receive it. Make sure you understand the final loan terms and the amount you’ll be expected to provide at settlement, and ask about anything that doesn’t make sense.

And when it’s time to send money, slow down. Wire fraud is a serious risk in real estate transactions. If you receive wiring instructions by email or text, independently verify them with the title, escrow, closing, or settlement company using a trusted phone number before sending funds.

UNTIL YOU HAVE THE KEYS…
You don’t have to put your financial life on hold until closing. Keep paying your bills, handling normal expenses, and living your life.

For the bigger decisions, though, give yourself one extra step: check with the lender first.

If you have questions about your loan or closing, reach out to me. I may not be the person making the underwriting decision, but I can help you get to the right person and make sure you know what questions to ask.

You’ve already navigated most of the journey. A little patience now can help make those last few steps the easiest ones.