As Orlando real estate agents our job is to help you find the perfect home, evaluate property condition, and ultimately write offers that will beat competing buyers for your next move. Once you’re under contract on your next home, vacation property, or investment, most of the legwork is finished and we work closely with your mortgage broker to make sure they’re able to get your loan approved in time. We’re proud of our track record in seeing our buyers loans through to approval and here are 4 activities we encourage all our clients to avoid once they’re under contract on a new home.
1. Do not buy a car, boat, furniture or any other major purchases
A lot of homebuyers want to deck out their new homes with designer furnishings, state-of-the-art home theaters, or the latest appliance packages like this refrigerator with a touch screen! Shopping and purchasing these items before you close might seem like a good idea because a lot of the time they have to be shipped and most buyers want to move in and get their home setup on closing day. Unfortunately your mortgage pre-approval was issued based on a specific set of criteria such as your debt-to-income ratio, cash reserves, assets, etc. Any substantive changes to these figures can jeopardize your loan approval and cause a rate/down-payment adjustment at best and a loan denial at worst.
2. Do not apply for ANY new credit
Lenders rely heavily on credit scores when determining a potential mortgagor’s ability to repay a loan. Each pre-approval is issued assuming a certain minimum credit score and this is easily altered by applications for new credit. Credit offers that say “Pre-approved” or ” X Days Same As Cash” can impact your score as much as traditional credit applications and mundane things like changing your cell phone plan can have an impact. In this market, the average days from contract to close is about 30, so put these decisions off for a few weeks to save yourself potential closing delays.
3. Do Not Pay Off Charges or Collections
Obviously we’ve covered that taking on NEW debt could negatively impact your approval odds, but surely paying off existing debt couldn’t hurt right? WRONG! While paying off old debt might seem harmless, this will still impact your FICO® score and trigger a credit profile change. It can also reduce the amount of cash reserves you show, keep the money in savings and pay this off post-closing.
4. Don’t Make Unusually Large Deposits Into Your Bank Accounts
It’s actually a good idea not to make any large withdrawals OR deposits once you’re pre-approved. Large deposits other than normal income will have to be “sourced”, and an underwriter could have an issue with the deposit that causes delays. It’s not uncommon for homebuyers to receive large cash “gifts” for help with a downpayment or even as a wedding present. If you plan on receiving a gift prior to closing, let your loan officer know in advance so they can plan accordingly.