Top 10 Mistakes to Avoid Before Closing Day

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The home buying process is arduous and exhausting. It’s similar to running a marathon where each action you take prior to closing day can impact your chance of success. In this post, we’re going to discuss the top 10 mistakes to avoid leading up to closing day so that there are no roadblocks as you near the end of your homebuying journey.

Ignore Your Lender

Remember, your lender is working tirelessly to prepare all the necessary documents for your closing. When additional information is needed, they will contact you immediately. It’s in your best interest to submit the requested information to your lender as soon as possible. The home buying process can be a stressful time in your life and while you may have a lot on your plate, don’t ruin how far you’ve come by delaying correspondence with your lender. Not responding in a timely manner, may delay the process or derail the deal altogether.

Quit or Change Jobs

Even if a new job means a pay raise, your lender needs to verify your employment with several months of pay stubs. If you can help it, stay put with your current employer so that all the information you provided initially stays relevant. If a new opportunity does come up before you close on your home, try and wait until keys are in hand to make the change. If that isn’t possible, contact your loan originator as soon as possible to let them know of this new development. Be aware that making a career change will most likely delay your closing but isn’t a deal-breaker.

Pay Bills Late

There’s a good chance that the reason you were approved for your home loan in the first place is because of your upstanding payment history. With payment history typically accounting for about 35% of your credit score, one late payment can bring it down. Thinking that having a closing date means you can be lax about when you pay your bills would be a costly mistake. Don’t jeopardize yourself by forgetting to pay your bills. Be sure to continue making timely payments and avoiding late fees or collection notices.

Open New Credit Cards

Avoid making new purchases or opening lines of credit while you wait to close on your loan. Sure, that big screen TV for the media room is enticing, but wait until you have the keys to your new home before making any large purchases with your credit card. Your credit score was a huge factor in getting approved for your loan and applying for a line of credit before everything is finalized can have a negative impact on the process.

It’s natural to want to start making those purchases that make a house feel like a home. Whether it’s a new couch, bedroom set, or appliances, it seems like a no brainer to use your credit for such items. However, holding off until after you’ve closed can mean the difference in a successful closing or derailing the process. Are you willing to take that risk? There will be plenty of time to buy home furnishings – after you close the deal.

Close Lines of Credit

While closing unusual credit accounts or transferring the debt to a credit card with a lower interest rate is generally a good idea, wait until after your closing date. It’s important to realize that your credit is a delicate balance that has been picked apart for the purpose of being approved for your home loan. Closing a line of credit can affect your debt to income ratio and become a red flag to your lender.

Deposit or Transfer Large Sums of Money

You’ll have to provide your most recent bank statements before you go to settlement. If you do have a large or unusual deposit before closing, be prepared to provide complete documentation of where the money came from. According to Fannie Mae, a lender must evaluate large deposits to ensure that they fall within the acceptable guidelines. Basically, if you receive a deposit the size of your paycheck or larger and can prove that it came from a legitimate source such as the sale of a boat or car, then you should be fine. However, if thousands of dollars just show up in your account and can’t be explained, your entire income stream may be questioned, delaying your loan closing. So, ask Uncle Phil to hold off on giving you that sizseable housewarming gift or paying back a substantial loan until after closing.

Co-sign a Loan

When you co-sign a loan for someone there are certain risks that you should be aware of, one being that you are agreeing to pay that borrower’s debt if he or she defaults on the loan. While doing so is completely up to your discretion, it is not something you should consider during your homebuying process. In addition to having another credit inquiry affect your credit, you’ll also be increasing your debt-to-income ratio, two things you should avoid until your closing has been finalized.

Change Bank Accounts

Lenders look for two things when deciding whether to approve you for a loan: where your money is coming from and how long it has been in your account. During the homebuying process, they have actually made it their job to become familiar with your finances and bank history. While you may have great reasons to switch to a different bank, doing so could delay your closing. If there’s not a dire reason for you to change banks in the middle of your homebuying process, wait until closing day has passed. Lenders are looking for consistency, routine, and uniformity. Be sure not to rock the boat by making waves for unnecessary reasons.

Misleading Loan Application

The mortgage process can be daunting and embellishing on your loan application may seem like an innocent enough way to strengthen your odds, but lenders have plenty of ways to fact check your claims. If your lender learns that you lied to them in any way, you will likely have your application rejected. What you may consider being an insignificant stretch of the truth or even an honest mistake can cause significant problems with your loan. As your closing day approaches, your lender may reach out for additional information. Remember to always be honest and forthcoming with your responses. Transparency with your lender is key when buying a home.

Apply for a Payday Loan

As you prepare to make perhaps the biggest purchase of your life, taking out a payday loan may seem like a smart alternative to spending your cash on hand. However, while these types of loans are generally for small amounts, they come with extraordinarily high-interest rates. Aside from putting yourself in a less-than-ideal situation, this will also affect your credit at a crucial time and can delay your loan process. The key to a smooth closing is keeping your finances as close as possible to what they were when you were originally approved. Lenders do not want to feel like they are taking a gamble. In fact, it’s the complete opposite: they want reliable and steady.

The home-buying process is difficult and stressful, but avoiding the mistakes discussed above will ensure smooth sailing to the finish line. It may seem like you have to put your life on hold during the lending process, but be patient and know that as soon as you’ve closed, you can resume your usual activities.

I built my law practice on the premise of being a life raft in a sea of sharks. I want to be an advocate for those that have been wronged and are too intimidated to seek help. My firm is here to explore your options, guide you through your legal journey, and give you that safe space to ask questions! There’s no such thing as a stupid question…Only the ones you don’t ask. So, my question to my clients is not “do you have any questions?” But rather “what questions do you have?”

As always, the Kazi Law Firm is standing by to help you in your time of need. Don’t hesitate to contact us today. We specialize in real estate law, landlord-tenant disputes, immigration, and wills & estate planning. Family is at the core of our practice. Just as we treat our family with respect and understanding, we treat yours. Come join the Kazi Law Firm family today!

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