Your agent keeps telling you not to make big purchases during the home-buying process, but you just don’t understand why buying a new couch or opening a credit card to save 20% off your $50 purchase will be an issue. Any purchase, however big or small, can change your credit score and mess up the deal before it’s even closed. Here are some thinkgs to keep in mind and avoid doing until you close on your new home - and avoid the "what were you thinking?" questions later.
1. Don’t quit your job
I know you’re excited about your new home, but this is NOT the time to start re-evaluating your entire life. A new home is enough excitement for one month. Save the job search for next month. I once had a buyer who gave his 2 week notice 11 days before the scheduled closing. "But I'll be making $80 more a week," he said, figuring that made his buying position stronger. Think again! That $80 a week was a costly mistake that ended up costing the buyer money to extend the closing date out several weeks and lock in his interest rate. Luckily the buyer was working with a super lender who was able to make things happen for him.
2. Don’t make large purchases
It’s really tempting to splurge on big scale purchases like a new car, furniture or appliances to match your fancy new home. It is even more tempting when a store is offering you a $10,000 line of credit with no payments for one year, but just don’t do it. DO. NOT. DO. IT! At least not until the deal has closed and the keys are in your hands. Sure, you can window shop, measure and plan where your new furniture will go, but don't buy it or even put a deposit on it until you have closed on your new home!
3. Don’t make large deposits or withdraws
If you are going to accept a large amount of money or move a large amount of money from one place to another, make sure your lender knows. Most of these things can easily be explained and likely will fly under the radar so long as they are brought up before hand and not discovered by your lender later. Remember, until the deal is signed and everything is done, you are under a watchful microscope. Don’t do anything to mess it up. I had a lovely buyer couple a few years ago who received the proceeds of the week's collection plate at their church. Well, that $1,117 deposit into their checking account raised a flag with the lender. Can you imagine how difficult it was to source that income? Each parishioner put in a different amount of cash, with parishioners putting in everything from $2 to $50? The lender worked out a solution with the church, but not without a few headaches and sleepless nights!
4. Don’t open or close lines of credit
Opening up new credit cards or closing old ones just before signing on your new home can potentially affect your credit score, and not in a good way. That being said, as mentioned before, wait until your mortgage and title are secure before making any risky moves. Is it worth putting your mortgage in jeopardy in order to save 20% off your purchase? Please wait to make those purchases and DO NOT open a new credit line! And don't close a line of credit unless your lender advises that you do so.
5. Don’t pay your bills late
This may seem obvious but it tends to slip some homebuyers' mind. Stay on top of all your payments and don’t let late fees creep up on you. Don’t ruin your credit score days before your loan goes through. This is especially easy to do if your current mortgage or property tax payment is due shortly before the closing on your new home.
Just remember that once you submit your loan application your finances and job status will be under scrutiny. Any change can affect the closing process and prevent you from moving into that beautiful new home. It’s always best to wait until the keys are in your hand before making any changes - even if you think they won't matter. And as always, feel free to ask your agent and lender if you have any questions or concerns!