Buying a home is a wonderful and exciting time. It’s one of the most rewarding parts of my job to tell a buyer they’re going to be a homeowner. But as quickly as that joy comes, it can turn into a nightmare if one of any number of simple mistakes occur. There are numerous things you should avoid doing once you put a home under contract to avoid losing out on everything, and here’s some of the key items.
Don’t Make Any Major Purchases
I know it’s tempting to see your dream refrigerator on sale while you’re under contract, but making a large purchase is a no-no unless you do it with reserve cash. Any increase in credit card debt can cause your monthly payment to rise, which can throw your Debt To Income Ratio all out of whack. This could cause you to lose the loan and, if you’re already outside if your financing period, you just lost your earnest money in addition to the option money. It is best to wait until after you’ve already signed the closing papers and you’ve heard the word ‘FUNDED’ from your Realtor to go and buy anything.
Don’t Apply For New Credit
No one likes earning airline miles and hotel points as much as I do. I’ve been all around the world with the free stuff i’ve racked up. But putting in that application for the new American Airlines credit card will affect your credit score. This can see a difference in your interest rate, which also might affect how much home you qualify for. This also goes for new cars, boats, student loans, and trying to save 15% at Kohls by getting their card.
Don’t Close Credit Card Accounts
You should never do this anyways, even if you pay off a card. Having a paid off card is a very good thing for your credit, and the longer you have a card, the better your credit score. Closing an account can change your average length of credit, which also affects your credit score. This also goes for any bank account, unless instructed by your lender.
Don’t Consolidate Debt
This is also a type of new credit. See above for the side effects.
If you have ANY QUESTIONS AT ALL, please ask the lender before doing anything. I know it’s tempting to just be impulsive, but you’ll regret it later when you’re denied the loan because you were afraid to ask. There’s nothing wrong with being sure.
You can also get a copy of my Home Buyers Handbook when buying to learn about the process!