Buying a house in the Sacramento area? STOP and don't buy anything else until escrow closes!

Real Estate Agent with RE/MAX Gold, Fair Oaks

A couple of days ago I wrote a blog post explaining the difference between a buyer who is pre-approved and one who is merely pre-qualified, and why a buyer should get pre-approved before house hunting.

Another extremely important issue can affect whether or not the buyer will be able to close STOP before buying something during escrowthe transaction. Once you have been pre-approved for a loan, DO NOT buy anything! If you make any purchase that might have to be financed or one that reduces the amount in your savings accounts, even if you think you can afford it, STOP before making the purchase and check with your lender.

Here is why. If you look carefully at your pre-approval letter, it will contain language such as "if circumstances remain unchanged" or "if the financial condition of buyer remains the same at scheduled close of escrow as it is today" or something similar.

You should realize that before pre-approving you for your loan, many factors were considered, including the amount of your debt-to-income ratio, your cash balances in banks, and your payment history as reflected in your credit report.

BUying a truck during escrow may get your home loan denied!At the very end of the escrow period, just before close, those factors will be reviewed again. If there has been a change, you might find to your horror that you can no longer be approved for that loan, and you cannot close escrow and buy the house you wanted.

I always warn my Sacramento area buyer clients about this, and remind them several times during the house hunting and during escrow, but every once in awhile a client gets starry-eyed about the excitement of buying a home he loves and he forgets my advice.

My heart falls when a buyer tells me during escrow that he is going to save money on moving expenses because he just bought a new truck. He thinks that since he is saving money, it iwll make no difference. Wrong. The credit review considers past expenses, regular monthly expenses, and available cash. It does not, as a rule, consider one-time expenses such as moving in determining your creditworthiness.

Your lender might helpfully remind you that you will have expenses other than the purchase price of the house, but there is no way buying a truck can help you, but it most certainly can hurt you.

The same goes for buying a couch or other piece of furniture. I got an excited call from one buyer who informed me that since her new home was so much larger than her tiny apartment, she could finally buy the sectional sofa that she wanted. Do Not buy furniture before close of escrow

She put a deposit on it and said her first payment wouldn't be due until after close of escrow, and it wouldn't be delived until then. I had to bust her balloon by asking her to call her lender immediately, and it turned out that unless she could get her deposit back and cancel the purchase, she could not buy the home she loved.

Luckily, the furniture store allowed her to do that, she closed escrow and waited a few months until she knew what her new monthly expenses would be. Then she went back to the store and bought the sectional on different terms that lowered her monthly payment on it.

So please, once you're pre-approved, DO NOT buy anything until after you have checked with your lender. Otherwise, that great Sacramento area home you love might be lost and you will have to start all over to find a different home to buy. 

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Thinking of selling your home?  Remember, it costs you nothing for me to come out and discuss your home, the market in your area, and give you a market analysis and presentation so that you will know what you can expect to get for your home.

Call for appointment:  (916) 705-8951

Also Remember, if you are planning to buy a home, I can help you to tour any home for sale in Sacramento County and the surrounding areas, no matter what firm has it listed, and I can help you with your purchase if you find the perfect home for you.

Just give me a call at (916) 705-8951

Susan Neal
Broker / Realtor

Susan Neal Fine Properties
Fair Oaks, California

Full time real estate services in Fair Oaks CA, with friendly professionalism, 30+ years experience. 
I work hard to give my buyer or seller a low-stress transaction.

"Happy clients make me happy."

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Comments (9)

Wayne Zuhl
Remax First Realty II - Cranford, NJ
The Last Name You'll Ever Need in Real Estate

Great advice for homebuyers - there's nothing worse than losing a mortgage approval because the would-be buyers needed a car.

Dec 29, 2013 10:07 PM
Susan Neal
RE/MAX Gold, Fair Oaks - Fair Oaks, CA
Fair Oaks CA & Sacramento Area Real Estate Broker

Wayne and Jean Marie - True, and I wish I could convince people of just how much damage it does for them to make major purchases. They think they're being smart to be ready for the move-in, but it's just the opposite.

Dec 30, 2013 09:02 AM
Cara Marcelle Mancuso
Golden Girls with SW Desert Homes - Tucson, AZ
Call a Marana neighbor, I'm THERE!

A great year end reminder that can't be brought up too many times in 2014.  Buyers need to watch any sort of credit purchase or agreement during escrow.  No new washer and dryer for the home, no new cell phone...and on and on!  Happy New Year Susan

Dec 31, 2013 12:34 AM
Roy Kelley
Retired - Gaithersburg, MD

This is very good advice for prospective home buyers.

Have a most productive 2014.

Happy New Year!

Dec 31, 2013 12:51 AM
Susan Neal
RE/MAX Gold, Fair Oaks - Fair Oaks, CA
Fair Oaks CA & Sacramento Area Real Estate Broker

Cara - Right. There are so many purchases that may not seem like a big deal, but if they make you closer to your limit on credit cards or deplete your bank account even a few hundred dollars, it may be just enough to put you in a different credit score category.

Roy - Thanks, and happy new year to you too! Thanks for stopping by.

Dec 31, 2013 03:03 AM
Wayne Johnson
Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX
San Antonio REALTOR, San Antonio Homes For Sale

Susan-Excellent point and it cannot be overstated. Buyers should heed your advice. 

Jan 02, 2014 06:38 AM
Susan Neal
RE/MAX Gold, Fair Oaks - Fair Oaks, CA
Fair Oaks CA & Sacramento Area Real Estate Broker

Thanks Wayne. I guess we have to keep repeating it, because clients keep doing it, and they can really hurt their chances to buy the home they want.

Jan 03, 2014 01:23 PM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Great advice for homebuyers, Susan!  I routinely advise buyers of this when they are purchasing homes.  I remember one guy, who went out and bought an expensive boat, just prior to closing.  It wasn't fun getting that transaction closed.

Apr 16, 2014 06:50 PM
Mike Young, covering the USA - Stallings, NC
FHA 203k Consultant 916-758-1809

We had a client buy Christmas presents for their kids on their credit cards just before Christmas with the closing supposed to happen on the 26th or 27th... needless to say we got that panic phone call that their ratios were no longer adequate. Luckily we were able to save the day by using the EEM (Energy Efficient Mortgage) piggyback to the loan they applied for. 

Sep 22, 2014 12:21 AM