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Are you on the verge of closing on your dream home? It’s crucial to be mindful of certain financial decisions that could potentially jeopardize the closing process or even prevent you from obtaining a mortgage altogether. To ensure a smooth closing, here are five common mistakes you should steer clear of:
1. Refrain from Major Purchases
As you approach the closing date, avoid making significant purchases like a new car, boat, or any other expensive item. Even purchasing furniture or appliances on installment plans is best postponed until after your mortgage is finalized. Such transactions may impact your credit score and history, potentially leading to higher interest rates or requiring a larger down payment. Delaying major purchases until the closing is complete will safeguard your qualification for the loan.
2. Be Cautious with New Credit
Opening a new credit card or closing an existing one can also affect your credit score. During the lead-up to the mortgage closing, lenders meticulously assess the credit risk for each applicant. Any changes to your credit score during this critical period could work against you and might even impede the loan finalization. Be especially cautious if you’re on the borderline of qualifying for a mortgage due to a low credit score.
3. Steer Clear of Job Changes
Changing jobs just before closing on your new home is a mistake you should avoid. Mortgage lenders scrutinize employment history for consistency, and making job switches can delay the closing process. If possible, hold off on any job changes until after the closing to ensure a smoother transaction.
4. Respect the Timeline
Closing on a mortgage is time-sensitive, even if you’ve locked in your rate. It’s essential to stay organized and ensure all required paperwork is submitted on time. Failure to do so could lead to the loss of your agreed-upon terms, necessitating the restarting of the entire process.
5. Think Twice about Personal Loans
Obtaining a personal loan or co-signing for someone else’s loan can present challenges before reaching the closing table. Lenders take into account your debt-to-income (DTI) ratio, a crucial factor in mortgage approvals. Depending on the loan amount and how it affects your DTI, lenders may reject your loan application, even if you were preapproved. A hard inquiry resulting from applying for a personal loan could also impact your credit score, potentially making you ineligible for the mortgage.
By avoiding these five common mistakes, you can safeguard a successful mortgage closing and move into your new home with peace of mind. Remember, being financially responsible during this crucial time is key to securing your dream home and the loan you need.
