EIGHT pitfalls to avoid, while awaiting your mortgage.

Reblogger Esko Kiuru
Services for Real Estate Pros

Alan's blog is totally important when the buyer is anxiously waiting for the deal to close. Basically, to avoid any potential setbacks, he needs to refrain from doing anything new or different from his daily routine. The lender world is rather fickle today. 

Original content by Alan May

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

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

Coldwell Banker Residential Real Estate, 2929 Central Street, Evanston, IL 60201
847.425.3779      Cell: 847.924.3313      Email: Almay@aol.com

Evanston Real Estate & North Shore Real Estate
Licensed in Illinois

    

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Rainmaker
1,676,510
Winston Heverly
Winston Realty, Inc. - Atlantis, FL
GRI, ABR, SFR, CDPE, CIAS, PA

What makes this equally important or a worse situation is waiting out a short-sale.

Sep 11, 2012 12:52 PM #1
Rainer
172,864
John & Irma Nelson
San Antonio Real Estate Broker/Agent with Get It Sold Realty - San Antonio, TX
San Antonio Real Estate Agents - San Antonio Homes
Great reblog. I am sure this list will prove to be very helpful to both agents and clients. Thank you for posting this!
Sep 11, 2012 01:09 PM #2
Rainmaker
2,897,871
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Yeah I agree with Winston on this one! Thanks for the reminder! :)

Sep 11, 2012 02:03 PM #3
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Winston,

There you go, the infamous short sales with their unpredictable time lines.

Sep 14, 2012 09:51 AM #4
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

John & Irma,

Alan reminds us of what's very important.

Sep 14, 2012 09:53 AM #5
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Laura,

Thanks for stopping by.

Sep 14, 2012 09:54 AM #6
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Rainmaker
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