EIGHT pitfalls to avoid, while awaiting your mortgage.

By
Real Estate Agent with Jameson Sotheby's International Realty

At one of my myriad of workshops that I attend, a lender presented us with a top-ten list of things NOT to do, once you're under contract and anxiously awaiting your loan commitment, and eventually your closing.  Many buyers, not merely first-time buyers, are not aware of these tips.  I didn't love all ten, but I thought seven of them bore repeating. 

Why is it important?  Well, in today's interesting financial times, lenders are pulling your credit more than once during the loan process.  In fact most times, at least in our region, they're pulling a last credit-check the day of, or the day before closing.  That's right... one last time before cosing.  If anything significant has changed, from the time you applied for you loan... and were preapproved, and now... it could totally mess things up.

Best-case scenario, you might no longer qualify for the rate you have locked-in.... or perhaps it might cause a delay requiring you to go back into underwriting.  Worst-case scenario... you might have 'screwed the pooch', and no longer qualify for the loan at all.

So... here we go.

1) DON'T APPLY FOR ANY NEW CREDIT.  Yes, I know, it's tempting... money is tight, you've just given the seller 10% earnest money, and are seriously cash poor.  You've received a "pre-approved credit card" at one of the local department stores.  Even though it says pre-approved, if you accept, they will pull your credit, and it could cause a drop in your score.

2) DON'T PAY OFF ANY OUTSTANDING DEBTS, while you're waiting to close.  Especially past-due collections.  I know it sounds counter-intuitive, but it could cause those outstanding debts to suddenly come to the forefront (the last date of activity), and cause you serious problems.  If your lender insists that they need to be paid off... see if they'll let you pay it off AT the closing.

3) DON'T CLOSE ANY OPEN CREDIT CARDS.  Again, this is counter-intuitive.  It may cause your debt ratio to rise, and if this is a card that you've had for 10 years, and was paid in a timely fashion, you're removing that "good" history from your credit report.

4) DON'T MAX OUT or OVER CHARGE any credit cards.  This should be a no-brainer.  (ie: if you do it, you're just not using your brain!).  in fact, you know what... take your cards out of your purse/wallet, and leave them at home.

5) DON'T CONSOLIDATE ANY CREDIT CARDS.  You know the offers that say... "transfer your balance onto our card for 0% financing for a year".  While it looks like a smart idea on the surface, it could wreak havoc with your ratios.  Don't do it.

6) DON'T MAKE ANY MAJOR PURCHASES that might cause your score to change.  Don't buy a new car, even if you pay cash.  That might deplete some of your funds on hand that your lender is counting on.  Certainly don't buy a car with a new 5-year loan.  That'll totally screw up your ratios for the lender.  Depending on how tight your approval is, this might include buying furniture, timeshares, expensive vacations, window-treatments for the new house.  Be very frugal with your purchasing, during this period.  Once you've actually closed on the property and taken possession, you can go buy all that furniture on credit.

7) DON'T CHANGE YOUR PAYMENT HABITS.  Continue to pay your existing accounts on time... in fact pay them a few days early... just in case.  If they're paid early, that can only help you credit.  But odd as it seems, don't suddenly pay one off... or pay half of the balance.  If you've been paying $100/monthly, continue to do so.  Changes in paying habits 'could' become a red flag.

8) DON'T CHANGE anything ABOUT YOUR JOB.  Don't take a different position, transfer even within the company... before you accept any position like that, talk to your loan officer!!   Thanks, Jerry Newman (comment #8) for this extra one!

Let's be careful out there, shall we?

-10

Posted by

 ALAN MAY, Realtor®   
Specializing in Evanston Real Estate and North Shore Real Estate

Jameson Sotheby's International Realty, 2934 Central Street, Evanston, IL 60201
Office: 847.869.7300      Cell: 847.924.3313      Email: Almay@aol.com

Evanston Real Estate & North Shore Real Estate
Licensed in Illinois

   

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Re-Blogged 12 times:

Re-Blogged By Re-Blogged At
  1. Jim Patton 09/10/2012 06:22 AM
  2. Michael Blue 09/10/2012 09:01 AM
  3. Karen Feltman 09/10/2012 02:31 PM
  4. Melissa Marro 09/11/2012 02:55 AM
  5. Margaret Goss 09/11/2012 03:08 AM
  6. Evelyn Kennedy 09/11/2012 03:25 AM
  7. Brad Rachielles 09/11/2012 04:03 AM
  8. Mary Sheridan 09/11/2012 06:29 AM
  9. Esko Kiuru 09/11/2012 12:41 PM
  10. Deb McNeill 09/12/2012 07:11 AM
  11. Joy Daniels 09/13/2012 12:05 PM
  12. Charles Stallions 09/16/2012 07:38 AM
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Rainer
94,422
Ashley Connolly
Northeast Water Wells Inc - Jaffrey, NH

Wow interesting blog and i made a few of these mistakes myself when i closed thankfully they didn't effect the outcome but great to know. Congrats on the feature

Sep 11, 2012 04:49 AM #30
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
There's no place like home.

Mary Ann - you should still write it... we may have different readerships, and it's nice to reach them all.

Brad - thanks for the reblog.

Ashley - I think many, who don't understand how credit works, have made many of these mistakes.

Sep 11, 2012 05:32 AM #31
Rainmaker
212,771
Mary Sheridan
Keller Willliams - 1033 Hamilton Place,Johnson City TN 37604 - Johnson City, TN
Creative Marketing, Buyer Agency 423-943-7655

The craziest thing I had happen along this line was the buyer who got a raise that put her just barely above the income limit for the state program she was using.    If I'd had any idea this was coming or would have this effect, we could easily have just had the employer hold off for a couple of months.  

Sep 11, 2012 06:26 AM #32
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
There's no place like home.

Mary - now that's just too bad.

Sep 11, 2012 06:51 AM #33
Rainmaker
252,687
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

I have  a standard list such as these items and more that I put in every loan package. People do not realize how something they think is trivial can ruin their purchase or refinance.  There was a blog a few months back and one of the items was: Don't buy a car or van unless you plan on living in it!  I liked that one. You cannot hammer these items home often enough.

Sep 11, 2012 06:56 AM #34
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
There's no place like home.

Dora - you'd be surprised (or maybe not) at how many people pay little or no attention to the lists they receive from their loan officers.  Perhaps it has something to do with the fact that they are deer-in-headlights when it comes to the loan process.  So, as Gene mentioned, it doesn't hurt to tell them again, and again... and yet again.

Sep 11, 2012 06:57 AM #35
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Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Alan, you timed this perfectly. I have a couple right now who are just waiting to close. I sent them a link to this post. They have worked so hard to find just the right home, I would hate for anything to jeopardize that. Very wise words.

Sep 11, 2012 08:55 AM #36
Rainmaker
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Brian L. Sirota, Esq.
Bristar Realty (Realtor/Attorney) - Orange, CA
For Solutions: (714) 501-7660

Rule #9:  Don't even think about it.   Lenders are telepathic.   Brian

Sep 11, 2012 09:13 AM #37
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
There's no place like home.

Tammie - happy to help.

Brian - oooh... I wasn't aware of that one.

Erica - it's a classic.

Sep 11, 2012 11:20 AM #39
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Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M
Alan - This is such great information. So many people don't realize all the accidental trouble they can cause themselves when they're trying to get a loan for their new home.
Sep 11, 2012 12:31 PM #40
Rainmaker
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Andrew Ostrander
Ostrander Real Estate Group - Phoenix, AZ
Ostrander Real Estate Group

And I have a new one.  Had a client that was all qualified and ready to close.  Then, 20 days before closing they filed their taxes taking a major deduction for their only other investment home (in spite of the advice from the mortgage officer NOT to do so).  The lender checked and 2 days before closing they were disqualified.  So, "listen" to your mortgage loan officer through the process.

Sep 11, 2012 03:25 PM #41
Rainmaker
375,766
Lloyd Binen
Certified Realty Services - Saratoga, CA
Silicon Valley Realtor since 1976; 408-373-4411

Alan, so the buyer shouldn't go celebrate their accepted offer by buying a new Mercedes?

Sep 11, 2012 03:45 PM #42
Rainmaker
808,925
Cindy Edwards
RE/MAX Checkmate - Johnson City, TN
CRS, GRI, PMN - Northeast Tennessee - 423-677-6677

Alan,

This is such a great post.  People do need to know this information.  Thanks for putting it in writing to share with all of us.  I will bookmark for sure!!!

Sep 11, 2012 09:16 PM #43
Rainer
384,378
Laura S. Baker
First Weber Inc - Lake Mills, WI
Realtor (920) 728-4118, First Weber Inc

Huh, I was just about to get out the old ice scraper and then I see you posted this most awesome post!  I just had this conversation yesterday with a family.  I missed a couple of these!

Sep 11, 2012 09:35 PM #44
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
There's no place like home.

Christine - it's pretty easy to get into trouble... isn't it?

Andrew - that's a new one for me, too... always run any financial changes through your loan officer.

Lloyd - uh.... probably not.  Personally I wouldn't even buy a scooter!

Cindy - you're very welcome.

Laura - keep the ice scraper handy.

Sep 12, 2012 12:25 AM #45
Rainmaker
647,293
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

I send all of my clients a similiar do's and don'ts list.  I have seen this happen too many times.

Sep 13, 2012 12:24 PM #46
Rainmaker
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Wayne and Jean Marie Zuhl
Samsel & Associates - Clark, NJ
The Last Names You'll Ever Need in Real Estate

Great post, Alan! I'll definitely be sharing this list with clients - nothing worse than thinking the mortgage is in the bag and being wrong!

Sep 16, 2012 08:26 AM #47
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
There's no place like home.

Kathy - an excellent idea.

Wayne & Jean - it could turn out poorly.

Sep 16, 2012 01:06 PM #48
Rainer
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Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

Excellent information I will forward it if that is ok? thank you!!!

Nov 09, 2012 05:18 AM #49
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
There's no place like home.

Dave - it is absolutely okay.

Nov 09, 2012 11:10 PM #50
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