You found the dream house, got approved for a mortgage at a payment you can afford and are now just waiting to close. Time to take it easy --maybe start shopping for new appliances or even look into taking that new job that's closer to your new home.
Making certain decisions before your loan has closed could jeopardize it. Why? Mortgages are approved based on current financial situations and making changes that affect your finances could cause problems.
Here are the top financial and life changes you want to avoid while waiting for your mortgage to close:
1. Opening new credit
Does your new home need a refrigerator? Perhaps a washer and dryer? If you're a first-time homebuyer, chances are there are many big purchases that you need to make your house a home. But avoid the temptation to finance your new purchases!
Opening a line of credit, no matter how small, could put a halt to your mortgage approval. New credit affects your debt-to-income ratio and could make your credit score drop, sending red flags to the underwriter. Even if the closing isn't delayed, your new credit score could redefine your terms.
2. Moving money around
You need to provide proof of assets such as your down payment plus money for closing costs, and maybe even additional cash in the bank. But you also want to show proof that these assets are stable.
For example, transferring money from a business account to a personal account to pay the closing costs could make it appear as if your business or finances are unstable. Don't give underwriters a reason to doubt your stability and leave your money where it was when you were first approved for a mortgage
3. Closing credit
Getting your finances in order is a great idea, but don't close any unused credit cards in the process. Just like opening up new credit, closing lines of credit also affects your score, potentially jeopardizing your loan.
4. New charges on credit cards
You guessed it! Using your already open credit could also be a red flag. Making small purchases should be okay, but large purchases and maxing out credit cards are a terrible idea. Remember, any changes to your credit affect your debt-to-income ratio and your credit score, and could delay closing for weeks, months, or even prevent it from closing at all!
5. Changing jobs
Lastly, don't switch your employment while waiting for the loan to close. Your mortgage is largely based on your current employment situation --meaning both your income and years of employment. While moving into a higher paying job is certainly a good idea, wait until after you've moved to make any significant changes.
Remember, you want to show proof of soundness, including employment stability.
Delaying your closing isn't just about waiting longer to move into your home, it could mean incurring additional costs, or losing the original deal completely. It's just not worth it.
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