You found your dream home – congratulations! You’re in the middle of underwriting and can’t wait to hear the words ‘you’re clear to close.’ Even those words, though, mean nothing until the ink is on the paper and unfortunately, things can go wrong between underwriting and closing if you aren’t careful.
Avoid these common mistakes and you’ll close your loan just like you hoped.
Changing Jobs
If it’s at all possible, keep your job until after the closing. Even though lenders already verified your employment when you applied for the loan, they’ll do it again before you close. If they call and find out you no longer work there, it puts underwriting back at square one – delaying your closing.
Some borrowers lose approval altogether and others have to wait until they’re at the new job for a specific amount of time. It’s not worth the hassle or risk of losing your approval. If you don’t have a choice or wonder if it’s worth it – talk to your loan officer.
Closing old Credit Card Accounts
You may think it’s harmless or even good to close old credit card accounts, but it damages your credit score. Your length of credit history is 10 percent of your credit score. If you close a credit card, you decrease your length of credit history, which may lower your credit score. Lenders pull your credit one more time right before closing, so it’s not worth the chance.
Racking up Credit Card Debt
Leaving your credit cards open is important, but don’t use them. Try ‘freezing’ your credit where it’s at when the lender first pulls your credit report. If you rack up credit card debt it does two things. First, it may lower your credit score. Your credit utilization rate (the amount of credit used compared to your credit line) makes up 30 percent of your credit score, so increased outstanding credit hurts it.
Racked up credit card debt also increases your debt-to-income ratio, the second largest factor in your approval. If you hike your DTI up too high, your lender may need to determine if you still qualify for the loan based on the higher ratios.
Wait to Find Homeowner’s Insurance
All borrowers must provide proof of paid-in-full homeowner’s insurance at the closing. If you wait and can’t get the Declarations Page, and 12-month paid receipt, it delays your closing. No lender will close your loan unless you have proper insurance in place with the lender named as the ‘loss payee.’
Bring Cash to the Closing
Cash is king in most cases, but not at a loan closing. Make sure you have enough time to get to the bank and get a cashier’s check or order a wire. You’ll receive your Closing Statement at least three business days before the closing, giving you plenty of time to get to the bank.
Don’t make these common mistakes so you can avoid a delayed closing. There’s nothing more upsetting than getting to the finish line only to find out you can’t cross it. If you have questions or concerns about what to do or not do before closing, we’re happy to answer your questions.
