Buying a home? Don’t make significant purchases between loan approval and closing

Don’t make any significant purchases between your home loan’s approval and the actual closing date, warns Ilyce Glink at Inman Real Estate News. Your lender will pull an additional credit report just before closing to make sure you are still capable of paying your mortgage.

This may sound like common sense, but it happens more than you’d expect. Often times people will get all excited about the new home they are about to move in, and will make large purchases such as appliances, furniture or even a new car, which screws up their debt-to-income ratio. This, in turn, affects their eligibility for the loan, and causes the lender to either adjust the loan terms to something less favorable so that they can qualify, or to turn down the loan altogether at the very last minute. The lender will also do a verification of employment right before closing the loan.

The lender is just checking to make sure nothing has gone wrong or changed with your credit. What the lender doesn’t want to see is a huge run-up of credit card debt or other loans in the days before the loan closes. The lender will generally also require the borrower to sign a statement at closing affirming that there has been no change in the borrower’s financial ability to repay the loan and the borrower’s employment status remains the same.

As Glink further points out,

Buying a home is costly enough. But homes have ongoing maintenance issues and need repairs from time to time. If you start spending like mad and don’t put any cash aside for needed repairs, you may discover that your new home is unaffordable. If, however, you can make do with your old furniture for a while, bank the savings and avoid increasing your credit card debt, you’ll find it easier and more rewarding to be a homeowner.

 Link [Via Inman Real Estate News]