Buying a house is an exciting venture. Even if you already have a ton of household goods and furniture, you’ll still want new items to fit with the new place. But try to resist the urge to buy that furniture or anything on credit until after you close on the sale.
Not only will the wait prevent you from having to pay more in moving costs, it can also help you avoid problems that could derail your mortgage and prevent your sale from closing.
Many people think that if they don’t need to make a payment on a purchase until after the closing date, they don’t have a problem. But that’s a false assumption.
For starters, even if that furniture is offered with 0% financing and no payments until the next month with an “R” in it, the store will still run your credit, and that action could cause a drop in your credit score. Regardless of whether your loan has been approved long before, federal regulations mandate mortgage lenders to run your credit again shortly before closing. So if you happened to be close to the credit limit for the rate on your loan, the additional purchase right before closing could prevent you from closing on time with your preferred rate.
In addition, the fact that you will be adding new scheduled debt payments could affect your debt-to-income ratio, even if you’re not paying interest. If your ratio was borderline before, the additional debt could keep you from qualifying for the mortgage. You might have to accept a higher rate, and at the very least, your closing would be delayed.
For the same reason, it is a good idea to avoid signing up for a new credit card or line of credit, even if you don’t buy anything. If you want to take advantage of an offer of frequent flier miles or another bonus, you may be able to get an extension on the offer by calling the company and explaining that you are in the process of purchasing a house and need to wait until after closing to take any major financial actions.
If you’re not sure about a purchase or other action, call your mortgage lender and ask whether it would have a negative impact on your loan.
Taking on a major purchase or additional credit before closing is just one of many steps that could keep your home sale from going through. To prevent problems with title and other issues that could cost you extra or keep you from living in the home of your dreams, it is a good idea to work with an experienced real estate attorney during the sale process.
At Jordan & White LLC, our years of experience enable us to anticipate potential problems so we can keep your sale moving forward. Contact us today to learn more about the ways we can protect you during real estate transactions.