You’re Closing on Your Mortgage! Avoid These 5 Things.

Blog posted On June 27, 2019

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You’re almost there!  You’ve found the perfect home, you’re approved for your mortgage, and you’ve even picked out your new doormat to welcome everyone to the housewarming party you’re planning.  It can take anywhere from a few days to a few weeks to get to your final closing date and certain financial missteps could jeopardize your transaction.

Here are 5 things to avoid when you’re waiting for your mortgage to close:  

  1. Opening New Lines of Credit – Together, your credit mix and new credit influence 20% of your credit score. Even applying for a new credit card may impact your score.  This mistake is easy to make, especially if you need new appliances and the home improvement store is offering you a discount for opening a credit card.  Real estate experts advise against opening any new lines of credit during the mortgage process including credit cards, vehicle loans, personal loans, and others.  Your new car can wait until you’ve secured the new garage.
  2. Moving Money – Lenders review your assets during the mortgage application process to ensure you have the cash reserves to cover expenses related to the transaction and ongoing homeownership. Moving money between accounts, whether from a business account to a personal account, or a personal account to another personal account, is a red flag for lenders.  Minimize unusual account activity to keep your balances from fluctuating. 
  3. Closing Credit Accounts – Another common mistake is closing credit cards, especially if they are rarely used. The length of your credit history influences 15% of your credit score.  If you close a card you’re not using, and you’ve had the card for a long time, this will change the length of your credit history.  Closing accounts also influences our debt utilization ratio.  Using $0 on a credit card with a $10,000 limit is great!  It’s better to keep the account open and not use it. 
  4. Excessive Credit Card Spending – Moving to a new home usually means you need new stuff. From furniture to appliances to the cost of movers, you may be tempted to put those costs on a credit card.  Total amounts owed influences a substantial 30% you’re your credit score.  Maxing out your credit cards will also skew your debt utilization ratio.  Sleeping on an air mattress for a few days is worth it if it’s in your new house!
  5. Changing Jobs – Just like you don’t want to suddenly change your “debt” levels you don’t want to change your income either. Your lender will call your company to verify the length of your employment and your salary.  Changing jobs last minute is a red flag, as this will change both the length of your employment and your salary.  Even if the prospective new job has a higher salary, you’ll lose that established employment history.  Wait to make employment moves until after your loan has closed. 

Closing on your mortgage is an exciting feeling!  The last thing you want is for that transaction to fall through.  If you have any questions about what to do and what not to do during the mortgage transaction, ask your lender.  


Sources: The Motley Fool